H&M has unveiled a lower-than-expected pretax profit and gross margin performance as it is hit by the retail downturn.

In its third quarter the fashion retailer reported that pre-tax profits were SEK4.59 billion (£373m), up 4 per cent, but below consensus.

Bernstein retail analyst Luca Solca said H&M had “materially missed consensus expectations” with an EBIT performance which was 10 per cent below consensus and 5 per cent below Bernstein’s forecasts.

Sales excluding VAT for the third quarter were SEK20.9 billion (£1.7bn) and gross margin fell 0.4 percentage points year-on-year to 60.8 per cent.

Solca said: “Though the relative US dollar weakness helped compensate for higher input price inflation and transportation costs, gross margin suffered as a result of higher-than-average price reductions against a weak retail market.”

Sales excluding VAT for the fashion retailer for the first nine months of the year were SEK62.2 billion (£5.06bn), an increase of 12 per cent. Like-for-like sales were flat.

Pre-tax profits for the nine-month period grew 9 per cent to SEK14 billion (£1.14bn).

Sales in August grew by 8 per cent month-on-month, a 3 per cent like-for-like decline. Sales in September grew by 9 per cent year-on-year.

During the first nine months H&M opened 85 stores and closed nine. As of August 31 the group had 1,618 stores including 12 franchises.

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