Analysts have pointed to unseasonably warm weather in September as the reason for a larger than anticipated fall in fourth quarter sales at Hennes & Mauritz AB.
H&M, which operated 189 clothes shops in the UK as of September, announced on Friday that sales over the three months to November had fallen 4% compared to last year.
This narrowed to a 1% decrease in local currencies when Russia and Belarus were excluded from the figures, H&M added.
In the absence of further information, with H&M saying full results would be released in late January, analysts suggested adverse weather could be to blame.
Unseasonably warm temperatures in September likely dented demand for autumn ranges, Jefferies analysts said, with the cold turn in October and November then prompting a slight rebound.
H&M had indeed cautioned over September's weather previously, warning at the time that sales over the month could be hit by as much as 10% as the likes of the UK - its third largest market - experienced a late heatwave.
Both Barclays and Berstein analysts also pointed to a lack of information in H&M’s update, with the former noting there had been no comment on profitability.
“It is also interesting to note that H&M didn't reiterate the 10% full-year 2024 earnings before interest and tax margin,” Berstein added.
Profit margins could also be under pressure for other reasons, according to AJ Bell analyst Russ Mould.
He explained: “Like a lot of fashion retailers, H&M has suffered from having too much stock which it needs to offload.
“The only way to do that quickly and efficiently is to sell these items at a discount. That’s bad for group profit margins.”
H&M will be banking on a pre-Christmas rush to boost sales heading into the new financial year, Mould added, after “three quarters in a row that the company has been stuck in the mud”.
Barclays reiterated an ‘overweight’ rating ahead of H&M’s January update, alongside Jefferies, with a SEK 200 share price target being set, marking a potential 13% rise on Thursday’s close.