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Inditex And H&M Feel The Chill

posted 12 Jun 2013, 10:40 by Mpelembe   [ updated 12 Jun 2013, 10:41 ]


Reuters Business  Report - It's been a cold spring and summer in Europe and the world's biggest fashion retailers - Inditex and H&M - are feeling the effects.

Spain's Inditex, which owns the Zara chain, has posted its weakest quarterly growth in net profit in four years.

The group saw sales rise just over 5% in the first quarter.

European consumers are still strapped for cash - and the weather has done little to help sales of summer outfits.

It's a similar story at Sweden's H&M.

It hasn't yet posted its full quarterly results - but its net sales just missed analysts' expectations.

Ana Santi is deputy editor of fashion and retail magazine Drapers.

She says Inditex investors shouldn't be too worried by the results.

 Ana Santi, Deputy Editor, Drapers, 

"With the weather having been as it has been, you jus t can't expect them not to suffer. So I don't think it's a huge worry for them, it will be interesting to see what happens in Q2. But I wouldn't be too worried about it now, because they're certainly not alone, and the fact is, they are g rowing, it's just that the growth has slowed."

The world's biggest clothing retailer has expanded into new markets to reduce exposure to hard-up consumers at home

And it's outpaced its rivals in recent years.

But it looks like sales growth could now be slowing.

80% of H&M's sales come from Europe - so it's been hit harder than others by the region's downturn.

Despite the bleak economic background, online retailer ASOS is shining.

Its stock jumped by as much as 3.5% after it posted a 45% rise in third quarter sales.

ASOS enjoyed strong growth in Britain - and is expanding into Russia and China.

It's recently signed a deal with budget fashion chain Primark to sell cheap women's and menswear on the website.

Ana Santi, Deputy Editor, Drapers, 

"Zara will not be complacent, they'll be looking at ASOS, they'll certainly look at ASOS as a competitor. You have slightly older customers shopping at Zarabecause the price points are a little bit higher, so I do think ASOS's success will have more of an impact on H&M."

There's still time for the weather to improve this summer.

But H&M, Inditex and other retailers may soon have a dilemma - hold their nerve and wait for the sun or put summery clothes on sale early.