H&M Earnings Decline on Weakest Sales Growth in Three Years

STOCKHOLM, Sweden — Hennes & Mauritz AB reported a decline in second-quarter earnings as the Swedish fashion retailer marked down merchandise that was not selling in Europe because of unusually wet and wintry weather.

Pretax profit fell to 7 billion kronor ($850 million), Stockholm-based H&M said in a statement Wednesday. Analysts predicted 7.23 billion kronor. Gross margin narrowed to 57.6 percent, compared with the 57.5 percent estimate.

A cold, rainy spring has added to the challenges European retailers face as consumer curb spending on clothing. Snowfall in H&M's largest market Germany hurt sales in April, according to the company, which also blamed the early timing of Easter this year for lackluster growth in March. Even so, larger rival Inditex SA, the owner of Zara, still reported a 6 percent increase in operating profit in the three months through April, aided by its fast distribution system.

Quarterly revenue excluding sales tax reached 46.9 billion kronor, H&M reported earlier this month, trailing analysts’ estimates.

By Andrew Roberts; editors: Matthew Boyle and thomas Mulier.