HM struggles to compete with Zara owner Inditex
JuneAug local currency sales flat
HM prioritises profit over sales as it aims for margin recovery

STOCKHOLM, Sept 15 Reuters HM reported on Friday flat sales for its most recent quarter, lagging expectations as the world39;s secondbiggest fashion retailer struggled in the face of intense competition from Zaraowner Inditex and others.

HM shares fell more than 4 after the company said JuneAugust localcurrency sales, the most closely watched figure, were flattish yearonyear, missing the 5 growth forecast by analysts in a Reuters poll.

By 0800 GMT the stock was on track for its worst day in six months.

HM is in the midmarket and analysts say it is being squeezed on both sides by Zara which is appealing more to aspirational shoppers, and by fastfashion retailer Shein and Primark which are beating it on price.

All eyes are on the ability of HM, which also owns Arket, Cos, Monki, Other Stories, and Weekday, to improve its profit margins. The company said efforts to achieve its goal of a 10 operating margin in 2024 were going in the right direction, and that it prioritised profitability during the quarter.

In a sign of that strategy, HM has become relatively more expensive this season, RBC analysts found in a survey of UK apparel pricing published at the end of August.

Whether HM is able to turn its margin back is most important in the nearterm, said Jie Zhang, an analyst at AlphaValue.

The Swedish company39;s shares…