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Barclays takes sides with Inditex, sending H&M stock down

Barclays analysts downgraded Hennes & Mauritz (NHHMY) shares on Tuesday, arguing that its direct competitor, Inditex owned Zara, is the fast fashion retailer performing the best in Europe.

H&M Hennes & Mauritz AB (HNNMY) stock was under pressure Tuesday after Barclays analysts issued a market note downgrading the Swedish retailer to "underweight," after it concluded the "market is unwarranted in pricing similar cash flow growth for both H&M and Inditex."

Boris Vilidnitsky’s team of analysts further added that H&M's sales and store analysis points to a desolate outlook for the retailer, as much of its growth has come through opening new stores and sales have contracted across all key regions.

"We conclude that the market is pricing in similar future growth for both companies," Barclays wrote. "Given our analysis of store profitability and historical overview of margin evolution, we believe that the market is over-pricing H&M's free cash flow growth, while undervaluing that of Inditex."

On the back of the downgrade, H&M stock closed into the red, losing almost 1.60 percent of its value. The stock has been carrying a loss over the past six months, which extended Tuesday to a total 6.58 percent loss, according to ‘The Street’.