By Marie Mannes and Anna Ringstrom

STOCKHOLM (Reuters) -H&M, the world’s second-biggest trend retailer, reported on Wednesday a smaller-than-expected improve in gross sales within the newest signal it’s struggling to compete with Zara-owner Inditex (BME:).

Shares in H&M had been down 6% in early commerce, underperforming the broader Swedish market.

The Swedish group stated gross sales measured in native currencies for the interval, its fiscal first quarter, rose 3% from a yr earlier.

Jefferies stated local-currency gross sales, the figures most watched by markets, had been considerably lighter than consensus estimates and implied that gross sales in actuality fell 3% in February.

The dealer referred to as the outcomes “worse than feared” and that it anticipated a loss in earnings earlier than curiosity and taxes (EBIT) when the group studies its full first quarter outcomes on March 31.

Credit score Suisse additionally predicted a “materials” working loss.

H&M, which is in the midst of a programme to scale back employees and minimize different prices, stated web gross sales had been up 12% from a yr earlier to 54.9 billion crowns ($5.26 billion).

Against this, market chief Inditex reported on Wednesday a 13.5% improve in Feb. 1 – March 13 gross sales and a 27% web revenue improve for its fiscal yr by way of January.

Price range participant H&M’s earnings fell final yr because it didn’t absolutely cross on hovering uncooked materials, freight and power prices in an try and retain its price-sensitive prospects.

Royal Financial institution of Canada (RBC) stated it anticipated continued enter value will increase within the first quarter for the retailer and that it might keep underneath strain into the second quarter.

It predicted doable enhancements on the finish of the second and begin of third quarter, citing low costs to enchantment to H&M’s core buyer base, enhancements in womenswear, and a brand new artistic director.