H&M sales see a drop as the retailer struggles to compete with Zara

H&M has reported lower than expected quarterly sales as shoppers are facing a financial crunch

The world's second-biggest fashion retailer H&M has reported lower than expected quarterly sales as shoppers are facing a financial crunch due to a rise in energy and food bills. Another major reason is the rising competition with Zara, its contemporary. Third-quarter net sales at the Swedish group were up 3% from a year earlier at 57.5 billion crowns. Analysts polled by Refinitiv had on average forecast a 5% rise for the June-August quarter. Measured in local currencies, sales were down 4%. "The third quarter got off to a weak start, in common with the industry in many of the group's major markets," H&M, which does the bulk of its business in Europe, said in a statement.

The performance significantly underperformed market leader Inditex, the owner of Zara, which this week posted sales growth in constant currency terms of 16% for its May-July quarter. The Spanish group's growth pace slowed to 11% in the Aug. 1-Sept. 11 period. Inditex on Wednesday flagged further price hikes this autumn to offset soaring costs, despite worries demand would wane due to the cost of living crisis. H&M is due to publish its full third-quarter earnings report on Sept. 29