New York, NY, United States (AHN) – Europe’s second-largest clothing retailer, H&M, had its shares fall the most in almost two years in Stockholm trading after third-quarter profitability missed analysts’ estimates. The world’s third-largest fashion retailer by sales had its gross margins fall 1.1 percentage points to 60.5% in the quarter, compared with forecasts that they would grow 0.4 percentage point.
The shares dropped as much as 7.5 percent, the steepest decline since Dec. 5, 2008, according to the Wall Street Journal.
H&M blamed the decrease on increased spending of fabric quality and garment detailing and its decision to reduce some prices in an attempt to increase market share.
Since cutting prices again, forecasts of a one-percentage-point decline in gross margins in 2011 now look optimistic. Until the fourth quarter, H&M’s margins benefited from low raw-material prices and spare capacity at factories in Asia.
Perhaps H&M is also trying to gain more interest by using Anja Rubik as its model again. After starring in the retailer’s September catalogue, Rubik is featured in several fall H&M ads. Rubik, who has been featured on the covers of various magazines, including French, Korean, Japanese, Spanish, and
German Vogue, Nylon and Elle, and has modeled for such designers/brands as Givenchy, Chloé, Christian Dior, Hermès, Valentino, Gucci, , HVersace, Dolce & Gabbana, Prada, Chanel and Balenciaga, might be able to bring a high-fashion look to the less expensive retailer’s clothing ads.