Low-cost clothing offers hope as H&M posts a modest drop

London/Stockholm: Swedish fashion group Hennes & Mauritz (H&M) posted a shallower-than-expected fall in October sales, announced yesterday - raising hopes its focus on low-cost clothing would shield it from a consumer downturn.

H&M, Europe's second-biggest clothing retailer behind Spain's Inditex, said sales at stores open at least a year fell 2 per cent in October compared with the same time last year, the third consecutive monthly decline.

The average forecast in a poll of 10 analysts was for a 2.8 per cent drop, with estimates ranging from a 5 per cent fall to a 2 per cent rise.

H&M's sales update came as small but fast-growing British online fashion firm ASOS said it was defying the consumer downturn and planning to expand abroad.

ASOS, which posted a 68 per cent rise in first-half profit, said Finance Director Jon Kamaluddin would become its international director and it planned to launch local language websites, though it did not say where or when.

At 0925 GMT (1.25pm, UAE time), H&M shares were up 3.6 per cent at 262 Swedish crowns, outperforming a 0.3 percent fall on the DJ Stoxx European retail index. ASOS was up 7 per cent at 275 pence.

Curb on spending

Consumers across the world are curbing spending following steep rises in food and energy costs and after a crisis in financial markets has plunged large parts of the developed world into recession. US retail sales fell a record 2.8 per cent in October.

H&M shares have beaten the DJ Stoxx European retail index by 12 per cent this year, with the group's focus on low-price fashions and geographic spread raising hopes that it will be more resilient to the downturn than many.

Mid-market British rivals Marks & Spencer and Next, for example, have suffered much steeper falls in underlying sales.

But H&M, which in September missed third-quarter profit forecasts, is not without its problems.

Germany, its largest market, said last week that it fell into recession in the third quarter. The group could also be hit by the recent rise in the US dollar, in which it buys most of its goods, as well as rising labour costs in Asia.