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* H&M sales down in Feb for first time in 4 years
* Inditex sales up 13 pct Feb.1 - March 12
* H&M shares down 5 pct
* H&M full Q1 results due March 30
* Feb apparel sales down 9 pct in Germany
By Sonya Dowsett and Anna Ringstrom
LA CORUNA, Spain/STOCKHOLM, March 15 Fashion
retailer H&M's sales fell unexpectedly in February
while Inditex, which owns Zara, pulled further ahead of
its Swedish rival, helped by its expansion online and a bigger
emerging market presence.
Inditex, the world's biggest clothing retailer, has
consistently outperformed H&M in the past few years as a result
of online growth and its push into new markets. The Spanish
company has also diversified more quickly into higher-priced
brands, reducing exposure to the rise of discount chains like
H&M has embarked on plans to roll out ecommerce in more
markets this year and speed up expansion of newer brands such as
the mid-market COS and & Other Stories.
But on Wednesday H&M revealed that local-currency sales fell
in February for the first time in four years, slipping 1 percent
year-on-year, against a forecast in a Reuters poll of analysts
for a 6 percent rise. H&M's shares fell 5 percent.
In contrast, Inditex's local currency sales rose 13 percent
from Feb. 1 to March 12, as customers snapped up items from
spring collections like double-breasted jackets, palazzo
trousers and embroidered tulle tops.
This was adjusted for an extra trading day in February 2016.
H&M sales were up 3 percent in February, taking that calendar
effect into account.
Inditex results highlight the success of its strategy, with
like-for-like sales up 10 percent in the year to end-January,
helped by a shift towards opening bigger stores in prime
locations that are then integrated with online operations.
Inditex's gross profit margin missed analyst expectations,
falling to 57.0 percent in its 2016 financial year from 57.8
percent in 2015. This weighed on the company's shares which were
down 1.4 percent by 1014 GMT.
Inditex, known for speeding the latest trends from runway to
stores in a matter of days, reports in euros but makes more than
half its sales in other currencies, exposing it to falls in the
likes of the Mexican peso and the Russian rouble.
Chairman and Chief Executive Pablo Isla said this margin
metric would have increased on the year had it not been for the
negative currency effects.
Analysts expect this effect to swing in Inditex's favour
over the next 12 months with a consequent boost to profit
"We are very keen buyers of Inditex for 2017," Anne
Critchlow, analyst at Societe Generale, said. She said Inditex
trades on 26 times forward earnings, compared to H&M on 21
Inditex opened stores in 56 countries during the year,
including first openings in New Zealand, Vietnam and Paraguay,
bringing its total store count to over 7,200. It launched online
sales across its stable of brands in Turkey and said on
Wednesday it would start online sales in India in 2017.
H&M is more reliant on Europe than Inditex. In Germany, for
example, which is H&M's biggest market, apparel sales fell 9
percent in February, according to trade journal
"Market conditions are the main driver of the weak February
number," UBS analyst Adam Cochrane said. "There's a fear that
they are losing market share on a like-for-like basis." UBS has
a "buy" recommendation on H&M.
H&M reported that sales in local currencies rose 4 percent
in its fiscal first quarter to Feb. 28 That compares with a new
target for annual sales growth of 10-15 percent. H&M is due to
publish its full fiscal first-quarter report on March 30.
($1 = 0.9414 euros)
(Writing by Emma Thomasson; Editing by Susan Thomas and Jane