Zara increases its competitive edge over H&M

H&M is increasingly unable to compete with its Spanish rival Zara. In the three months to February, H&M’s sales rose by just 3 %, while the world’s number one – Zara’s parent company Inditex – achieved record profits.

H&M loses ground

H&M is still losing ground: with a sales growth of 3 % in local currency for the months of December to February, the second largest player in the fashion sector performed less well than expected. According to analysts at Jefferies, the figures show that sales actually fell by 3 % in February.

Still, H&M reports a 12 % net increase in turnover compared to the previous year, to 54.9 billion kroner (4.3 billion euros). Excluding the war zones of Belarus, Russia and Ukraine, sales increased by 16 % in net terms and 7 % in local currency. It had already become clear last year that leaving Russia would be costly for the Swedish group.

The group’s profits also fell last year, due to rising costs for raw materials, freight and energy, which the fast fashion player was unable to pass on fully to customers. CEO Helena Helmersson is reorganising the group by cutting thousands of jobs. H&M is also launching its own second-hand sales platform in the United States, a move that will soon be extended to Europe.

Inditex expands again after 4 years

Market leader Inditex, meanwhile, reported a 13.5 % increase in sales for the period between 1 February and 13 March and, more significantly, 18 % growth for the full year 2022, to 32.6 billion euros. Despite price increases of over 5 %, demand for the flagship Zara brand in particular remained strong.

Zara’s pre-tax profits even rose by 38.5 %, but some of Inditex’ other chains like Oysho and Massimo Dutti saw profits fall by around 10 %. For the year as a whole and for all chains, operating profit rose 29 % to 5.5 billion euros, although this was slightly below analysts’ expectations.

The Spanish group nevertheless plans to spend heavily this year, including 1.6 billion euros on shop and warehouse expansions. The group has closed about a tenth of its stores in the last three years, but now wants to modernise the remaining locations. For example, new security technologies will gradually replace the hard tags on clothes.

Inditex also wants to set up a second-hand platform in France and Germany, as well as a new Zara on the Champs-Élysées in Paris. Oysho is expanding into the United Kingdom and Stradivarius into Germany. In the US, the fashion giant is targeting stores in major cities such as New York, Los Angeles, Miami, Boston and Las Vegas. This is the first time in four years that Inditex is expanding its physical store network.