The decline deals a blow to hopes the world’s second-biggest fashion retailer is turning its performance around after lagging behind Inditex, as a cost-of-living crisis curbs shoppers’ spending.

“If the sales at your competitor basically go up by 14% with the same weather, that tells you something, to my mind,” said Vera Diehl, portfolio manager at Union Investment, which holds shares in both H&M and Inditex.

Operating profit in the June-August period, the Swedish group’s third quarter, was 4.7bn crowns (€404m) against a year-earlier 902m crowns. Analysts polled by LSEG had on average forecast a 4.7bn crown profit.

The year-ago figure included a one-off cost of 2.1bn crowns for the group’s exit from Russia, which also accounted for four percentage points of the 10% September sales decline, H&M said.

The company stuck to its goal of increasing operating margin to 10% by the end of next year, and said its cost-cutting programme was continuing “at full speed”.

The margin target is “challenging but achievable,” Barclays analyst Nicolas Champ said, adding that it would, however, require some acceleration in top-line growth.

H&M also said it had this month returned to JD, one of China’s biggest e-commerce marketplaces, after a prolonged absence due to criticism over its stance on alleged human rights abuses in China’s Xinjiang region.

It returned to Alibaba’s e-commerce platform last year, but has not been available on JD since 2021.

H&M announced a share buyback programme starting on Wednesday, planning to buy back up to 3bn crowns of stock by March 31 next year.

– Reuters