H&M's "Worse Than Feared" Q1 Sales Reflects Cutthroat Rivalry; Launches Resale Program In Partnership With ThredUp - Hennes & Mauritz (OTC:HNNMY)

On Wednesday, fashion retailer Hennes & Mauritz AB HNNMY reported a tepid first-quarter sales growth of 3% year-on-year in local currencies, reflecting its struggle to compete with Zara-owner Inditex.
Jefferies said local-currency sales were significantly lighter than consensus estimates and implied that sales fell 3% in February.
Jefferies called the results "worse than feared" and expected an EBIT loss when the group reports its full Q1 results on March 31, Reuters reports.
Credit Suisse also predicted a "material" operating loss.
H&M, in the middle of a downsizing program, said net sales were up 12% Y/Y to 54.9 billion crowns ($5.26 billion).
Inditex reported on Wednesday a 13.5% increase on February 1 - March 13 sales and a 27% net profit growth for its fiscal year through January. The report further added that H&M's profits declined last year as it failed to entirely pass on soaring raw material, freight, and energy costs to retain its price-sensitive customers.
Royal Bank of Canada (RBC) expected continued input cost increases in Q1 for the retailer and are likely to stay under pressure into Q2, the report added.
RBC predicted possible improvements at the end of Q2 and the start of Q3, citing low prices to appeal to H&M's core customer base, improvements in womenswear, and a new creative director.
On Tuesday, H&M tapped online consignment platform ThredUp Inc TDUP to launch a resale program.
Roughly 30,000 articles of clothing will initially be available on H&M's resale site.
ThredUp is responsible for powering the site and restocking it with H&M pieces sent in by users, Reuters reports.
Other clothing retailers, including Zara and online fashion retailer SHEIN, have also launched resale marketplaces to tap the growing interest in sustainability initiatives. Brokerage Morningstar has estimated that the resale market could grow to $300 billion by 2031.
Lucy Dunne, a professor at the University of Minnesota, said fashion sustainability should include efforts to cut back on production, consumption, and other initiatives. "If they're not actually producing less, that is not helping anybody," the report cited Dunne.
H&M does not currently plan to slow its clothing launches or reduce the overall number of items it sells, according to Abigail Kammerzell, head of sustainability for H&M North America.
Price Action: TDUP shares traded lower by 4.23% at $2.04 in premarket on the last check Wednesday.

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