(Bloomberg) --
Hennes & Mauritz AB's sales growth slowed in the key July and August months, hampering the Swedish retailer's attempt to end a three-year slump in earnings.
Sales growth probably slowed down to 6% in those two months from 12% in June, Berenberg analysts said, based on calculations from figures H&M reported Monday. The shares dropped as much as 3.2%.
H&M has been trying to reducing its high inventory level, which stood at 40 billion kronor ($4.2 billion) at the end of June. The retailer has struggled in recent years as its clothes fell out of favor with shoppers and it launched a plethora of new formats.
Rival Inditex SA this month reported an acceleration in sales, while Primark announced a drop in like-for-like revenue. H&M has recently slashed prices to as low as $5.99 for skinny jeans and $17.99 for a dress with a belt.
The retailer said its summer collections were well-received and it managed to increase market share. The sales increase of 8% in local currencies during the quarter shows that part of the revenue growth is coming from foreign-exchange moves. A weaker krona makes it more expensive to source goods from Asia, which could be cutting into profitability.
H&M was facing easy comparisons with the year-earlier quarter, when logistics issues exacerbated its inventory woes.
The stock has advanced 47% this year. H&M's stock can be volatile because short sellers have bet against about a sixth of the company's freely traded shares, according to IHS Markit data.
H&M is scheduled to report full earnings on Oct. 3.
--With assistance from Hanna Hoikkala.
To contact the reporter on this story: Thomas Mulier in Geneva at tmulier@bloomberg.net
To contact the editors responsible for this story: Eric Pfanner at epfanner1@bloomberg.net, Marthe Fourcade
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