H&M is under scrutiny as it navigates a turnaround strategy amidst a backdrop of slowing sales growth and persistent pressures on consumer spending.

The Swedish fashion retailer reported a four per cent increase in sales,equivalent to £2.24bn, for the three months leading up to February 28.

However,the company noted a deceleration in growth to one per cent in March,attributing it to ongoing strains on consumer finances.

Sales growth was further impacted by H&M’s strategic decision to reduce its store count and streamline operations over the past year.

H&M reported a net reduction of 40 stores during the quarter and has continued to close locations in recent months.

Turnaround Plan Initiated Last Year

The restructuring of its store portfolio is a key component of a complete turnaround plan initiated by Daniel Erver, who assumed the role of chief executive last year.

The group, which also encompasses brands such as & Other Stories and Cos, aims to revitalize its recent growth.

Adam Cochrane of Deutsche Bank cautioned that the latest quarter’s trading is “unlikely to be the turning point.”

He elaborated, “H&M is progressing through its turnaround but there will be relatively limited evidence of this in Q2, given the unhelpful weather conditions around Europe and the impact of negative currency exchange translation.”

“H&M is progressing through its turnaround but there will be relatively limited evidence of this in Q2…”

“Our updated earnings forecast of 5.6bn Swedish krona is showing a 21 per cent decline year-on-year, better than 42 per cent in Q1 but still hard to provide evidence of a sustainable turnaround,” Mr. Cochrane stated.

Mr. Cochrane also noted that an accumulation of stock inventory at the close of the first quarter is unlikely to have been fully resolved in recent months and could present “a further problem” as the company moves into the second half of the year.

Deutsche Bank projects that H&M will see sales growth moderate to 1.5 per cent for the current quarter,but indicated that this would equate to roughly a 5 per cent decrease when accounting for currency rate fluctuations.

James Grzinic, an equity analyst at Jefferies, holds a more conservative outlook, forecasting growth of 0.5 per cent for the quarter.

He explained that the brokerage is adopting a “more cautious view” regarding H&M’s recent performance, following indications that rival Chinese platforms are “losing momentum” in the US.

Meanwhile, competitor Inditex, the parent company of Zara and Pull & Bear, experienced a slowdown in growth to 6 per cent in recent weeks.