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Negative Datapoint from H&M

H&M’s sales comps are flat-out manic. Substantial slowdown in November, but pick-up in first two weeks of Dec. The volatility in sales trends has picked up at H&M – which (aside from Li&Fung) is the closest thing to a barometer for global apparel spending.

Comps accelerated their rate of decline drastically on a 1 and 2 year basis.  Comps almost fell to August’s levels which were the worst seen in over 5 years.  Only August 2009 and April 2008 experienced greater declines over the last 5 years.

As we’ve said in the past, H&M’s results are important to follow because it serves as a meaningful pulse on global discretionary spending. Many people underestimate how truly massive and relevant H&M is. While slightly smaller on the top line than Gap, its $2.6bn in EBIT dwarf’s Gap’s $1.6bn. Aside from being one of the largest, most profitable and highest-return apparel companies in the world, it is clearly the most diverse. 

In a move that we’d say is somewhat out of character for this company, it provided no commentary on the month’s results, but instead pointed to the more positive December trends which are up 11% over the first two weeks.  In other words – ignore the bad, focus on the good.  Nonetheless, if December holds at a double digit rate, then the 2-yr trend will be net positive. Let’s hope this continues. But ‘hope’ as we often say, is not an investment process.

Negative Datapoint from H&M - 1 year H M

Negative Datapoint from H&M - H M 2 yr