H&M's January Sales Beat Forecasts; Retail Market Still Tough

Hennes & Mauritz AB Monday reported a slight decline in Jan. sales from stores open longer than a year, as belt-tightening consumers continued to hit fashion retailers' revenues. Sweden's H&M, the world's third-largest fashion chain by revenue behind U.S.-based Gap Inc. and Spain's Inditex SA, owner of the Zara chain, said January same-store sales fell 1% from a year earlier. The decline was H&M's smallest same-store sales drop in six months. Analysts forecast sales in stores open longer than a year to fall a steeper 2.8%. However, Evli Bank analyst Anders Wiklund cautioned against viewing this as the beginning of a recovery for the fashion-retail market. "It's too early to say you can see things brightening," said Mr. Wiklund, adding that he doesn't expect the apparel-retail market to recover in a significant way until 2010. The retailer's total January sales, which include sales from new stores, rose 9%. As of Jan., H&M had 1,741 stores world-wide, up 14% from 1,524 a year earlier. "If you look at retail sales around the regions, it's still bad picture. I think this is more about H&M gaining market share," said Jyske Bank analyst Christian Nagstrup. European fashion retailers are struggling amid the financial crisis, especially in the U.K. & in Southern Europe. Yet, in some markets, sales picked up a little last month. In Germany -- which is H&M's biggest market & generates a quarter of its revenue -- clothing sales fell 1% in Jan., according to industry journal Textilwirtschaft. It was the smallest decline in several months. In its Swedish home market Sweden, clothing sales dropped just 1.4% last month, according to the Swedish Trade Federation. That's a stark improvement over the 5.6% decline in Dec. and 7.5% drop in November.