Executive Briefings

H&M Invests in Supply Chain as Fashion Rivalry Intensifies

Cost controls helped H&M to limit a drop in quarterly pretax profit but the fashion chain said it was increasing investments this year as it tries to keep pace with its larger rival, Zara owner Inditex.

H&M, the world's second-biggest fashion company, said conditions remained very tough in key European markets and in the United States, with shopping behaviour and expectations changing rapidly.

Earnings were dented by weaker than expected sales growth and bigger mark-downs and H&M shares fell 5 percent.

After years of hectic expansion across the world, the Swedish company's profitability has faltered as Inditex, Fast Retailing's Uniqlo and online specialists such as ASOS gain an edge in "fast fashion". By turning over more new styles each year and having production closer to customers, they can quickly boost supplies of best-selling items.

H&M's supply chain lead times are around double those of Inditex, according to a report this month by Goldman Sachs, which recommended that investors "sell" H&M shares.

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H&M, the world's second-biggest fashion company, said conditions remained very tough in key European markets and in the United States, with shopping behaviour and expectations changing rapidly.

Earnings were dented by weaker than expected sales growth and bigger mark-downs and H&M shares fell 5 percent.

After years of hectic expansion across the world, the Swedish company's profitability has faltered as Inditex, Fast Retailing's Uniqlo and online specialists such as ASOS gain an edge in "fast fashion". By turning over more new styles each year and having production closer to customers, they can quickly boost supplies of best-selling items.

H&M's supply chain lead times are around double those of Inditex, according to a report this month by Goldman Sachs, which recommended that investors "sell" H&M shares.

Read Full Article