With Christmas near, analysts remained upbeat on fast-fashion’s prospects, saying they stand to profit from cost-conscious European shoppers. Both Inditex, parent of Zara, and H&M have built steam over the last couple of months in a challenging retail environment. Inditex last week reported a 26 percent gain in third-quarter net income on sales that gained 20 percent. H&M reported an 11 percent gain in November sales.
“Zara offers the right trends and has adapted to climate changes, this is good for sell-through,” wrote Morgan Stanley’s Claire A. Kent in a report last month that upgraded the bank’s outlook on the Spanish firm. “Our higher confidence on Zara’s like-for-like sales performance stems from the fact that we believe Zara has offered the right trends this season – for women, that’s men’s military, black and short trousers,” she added. Lehman Brothers said H&M is well placed to resist factors that may adversely effect consumer spending in Europe , including the European Central Bank’s decision to lift interest rates by a quarter point to 2.25 percent.
“We believe H&M’s low-price positioning will enable it to withstand the potential squeeze on disposable income and may help the company benefit from customers trading down,” Lehman Brothers said. Shares of Inditex have gained more than 15 percent since January, while H&M’s shares have jumped some 13 percent over the same period. Paradoxically, luxury in Europe also is accelerating, with leading European luxury houses reporting gains across the continent after several seasons of tepid sales.
As the market continues to polarise between the high and the low – with the middle squeezed – among the most interesting retail phenomena is customers’ increasing readiness to mix luxury with disposable chic. Source: WWD