H&M reported first quarter earnings that came in below expectations, with analysts saying it was another disappointing update from the high street clothing chain.
The shares fell 5% in early trading but by mid-morning were up 2%, having already fallen over 20% over the past six months.
Earnings per share were 0.37 Swedish krona (SEK), around 40% below the consensus of SEK 0.62, as group sales rose 2% in constant currency to SEK 55.3 billion, missing consensus of SEK 55.8 billion.
Gross margin declined by 240 basis points to 49.1%, impacted by higher markdowns, investment in the product range and negative external effects.
Operating expenses were flat year-on-year and represented 46.9% of sales. EBIT margin fell to 2.2%, missing the consensus forecast of 3.2%.
Inventory rose 9% to SEK 41 billion, while store numbers fell to 4,949 following 40 closures.
Current trading indicates March sales will rise 1% in local currency. Gross margin pressure is expected to persist into the second quarter, though with less impact than the first quarter.
Deutsche Bank noted limited support for the share price outside of possible share purchases by the Persson family.
"Another disappointing update from H&M today despite expectations already being relatively low," analysts said.
In terms of outlook, they said the external drivers for gross margin "are expected to be negative but with less gross margin pressure" than in the first quarter, and there is "a risk" of further currency translation pressure given the stronger SEK that may weigh on consensus as well.
"Given current trading is at the weaker end of expectations and [second quarter] gross margin still looks under pressure, we see the shares down LSD-MSD% [low single digits to mid single digit] today.
"The valuation provides some support but we would expect some Persson family purchasing of shares to be the only material factor to help the share price."