By Helen Reid
LONDON (Reuters) -Swedish fast-fashion retailer H&M said on Thursday its sales were up just 1% in March after a weaker than expected first quarter, in a sign of a slow start to its spring and summer season.
H&M has ramped up marketing spend in a bid to boost its brand but the returns on that investment have been slow to appear, with anaemic sales growth and lower profitability.
The company reported sales of 55.3 billion Swedish crowns ($5.52 billion) for the December to February quarter, up 2% in local currencies but below analysts’ mean estimate of 55.9 billion Swedish crowns. March sales growth was weaker than the 4% increase reported a year ago.
“Our sales and earnings in the quarter were somewhat weaker than planned – but the first quarter is the smallest quarter of the year for us in terms of sales and margin, and we are confident going forward,” CEO Daniel Erver said in a statement.
Increased discounting and marketing investments impacted H&M’s profitability in the quarter, the company said, with the operating profit margin falling to 2.2% from 3.9% in the same period a year ago.
Erver, who has led H&M for just over a year, is trying to turn its fortunes around through better marketing, spending on pop stars like Charli XCX to model its collections as he tries to make the brand more desirable and better compete against Zara and Shein.
In his statement, Erver said the hit to profitability from investments in the brand would be smaller in the second quarter, and improvements to H&M’s womenswear product assortment were starting to have a positive effect.
After hosting a string of Charli XCX concerts last year, H&M has continued to invest in big-name brand ambassadors, hiring musicians Tyla and FKA Twigs to model its spring and summer collection launched last week.
The retailer, which also owns brands including Arket, Cos, & Other Stories, and Weekday, has been upgrading stores and sharply reducing its overall store numbers. H&M has 4,213 stores globally, it reported on Thursday, its lowest number since 2016.
($1 = 10.0259 Swedish crowns)
(Reporting by Helen Reid; Editing by Terje Solsvik and Jan Harvey)
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