H&M Falls Further Behind Zara as Online Shift Trips up Retail

STOCKHOLM, Sweden — Hennes & Mauritz AB lost more ground to Inditex SA's Zara as the crisis in brick-and-mortar retail hits weaker clothing sellers hardest. The Swedish company's shares fell the most in nine years.

H&M reported the biggest drop in quarterly sales in at least a decade Friday as fewer customers visited H&M stores, raising questions about the company’s expansion plans.

The retailer said it plans more store closures and fewer openings as a crisis that’s shuttered shopping malls in the US spreads to other parts of the world. The company’s earnings have suffered this year amid markdowns to clear out inventory. Rival Inditex has been outpacing H&M as it expands more aggressively in e-commerce. The Spanish company this week reported a rebound in revenue growth for November and early December.

H&M shares were down as much as 12 percent early Friday in Stockholm.

“Expectations were already low after a tough October for the clothing market was well-flagged,” wrote Michelle Wilson, an analyst at Berenberg.

Sales excluding value-added tax fell 4 percent to 50.4 billion kronor ($6 billion) in the three months through November, the Stockholm-based fashion retailer said. Analysts expected revenue to increase 2 percent. H&M’s sales have declined in only three quarters in the past 10 years, according to data compiled by Bloomberg.

In an effort to boost its e-commerce presence, H&M also said it’s expanding its cooperation agreement with Alibaba Group Holding Ltd.’s Tmall, adding additional brands on the Chinese digital platform.

By Thomas Mulier; editors: Eric Pfanner and John J. Edwards III.