H&M (STO: HM-B) 2Q16 Results: Sales Growth Slows

Executive Summary

• Excluding the effects of local currencies against the Swedish krona, H&M’s 2Q16 sales in the UK were flat, compared with an increase of 5% for all of H&M’s markets. The UK is H&M’s third-largest market after Germany and the US.
• Sales in March and April were significantly below the company’s plan, as they were negatively affected by unseasonably cool weather during the period. Sales improved in May, increasing by 9%.
• H&M’s profit in 2Q16 fell by 17%, to SEK5.36 billion from SEK6.45 billion in the same period last year, versus expectations of SEK5.46 billion. Profit was affected by the continued negative impact of the US dollar, but also by increased markdowns and costs related to long-term investments, as well as by lower sales.