Friday 13 December 2019

H&M blames results on weather as Qatar buys up French fashion house

A model walks on the runway at a fashion show for Belmain, a design house favoured by celebrities such as Kim Kardashian. Photo: Bloomberg News
A model walks on the runway at a fashion show for Belmain, a design house favoured by celebrities such as Kim Kardashian. Photo: Bloomberg News

Andrew Roberts

Hennes & Mauritz reported earnings that missed analysts’ estimates as the Swedish fashion retailer was hampered by Europe’s unusually wet and wintry spring.

Second-quarter pre-tax profit fell to 7 billion kronor (€747m), H&M said yesterday, compared with the 7.23 billion-kronor estimate of analysts polled by Bloomberg.

Earnings were also hurt by increased discounting and the strength of the dollar, which H&M said will continue to add to purchasing costs in the third quarter.

A cold, rainy spring has added to the challenges faced by European retailers as consumers curb spending on clothing.

H&M’s quarterly sales growth was the weakest in three years. Still, the weather didn’t stop Zara owner Inditex reporting a 6pc increase in earnings in the three months through April, aided by its fast distribution system.

H&M is more sensitive than Inditex to the strong dollar, which raises garment prices in Asia.

The results ‘‘resemble a company under pressure,” wrote Simon Bowler, an analyst at Exane BNP Paribas. ‘‘We can’t see an end or solution to these headwinds.”

The stock fell 0.6pc to 249.20 kronor as of 10:13am yesterday in Stockholm, reversing initial gains.

Sub-par sales have caused a build-up of inventory, which reached 13.7pc of sales, compared with 11.8pc a year earlier. Snowfall in Germany – H&M’s largest market – hurt sales in April, according to H&M, which also blamed an early Easter this year for lacklustre growth in March. May sales rose 11pc excluding calendar effects.

“There is little in the  results to suggest that earnings momentum will become more positive in the near term,” said Jamie Merriman, an analyst at Sanford C Bernstein.

Sales increased 7pc in local currencies in the first three weeks of June, H&M said. That was below the consensus of estimates, Merriman said. The retailer said the dollar’s effect may be neutral in the fourth quarter.

Elsewhere in retail, Mayhoola for Investments, an investment fund backed by the emir of Qatar, acquired French fashion house Balmain, adding a brand favoured by Kim Kardashian to a roster of labels that includes Italy’s Valentino.

Financial terms were not disclosed, although a person familiar with the matter said Mayhoola agreed to pay close to €500m.

The acquisition of 100pc of Balmain from shareholders including France’s Hivelin family will allow the brand to accelerate its development by opening new stores around the world, advisers Bucephale Finance said in a statement.

Balmain has become one of the most talked about fashion brands under creative director Olivier Rousteing, whose Instagram account is peppered with images of reality-television star Kardashian and her family wearing his military-inspired designs.

The fashion house, founded by Pierre Balmain in 1945 and revived in 1995 by Alain Hivelin, has enjoyed strong growth since Rousteing joined in 2011, according to the statement. (Bloomberg)

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