Daily Brief: The World Needs H&M, Even If China And Russia Don’t

Daily Brief: The World Needs H&M, Even If China And Russia Don’t

over 1 year ago3 mins

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H&M – the world’s second-biggest clothing retailer – posted impressive quarterly results on Wednesday.

What does this mean?

H&M said online sales continued to do well last quarter, but it was bricks and mortar stores that came out swinging. Demand was so strong, in fact, that the retailer didn’t need to offer so many discounts this time around, which helped its pre-tax profit come in 33% higher than the same time last year. Still, H&M isn’t in the clear: the company said its decision to stop selling in Russia – its sixth-biggest market last year – contributed heavily to a 6% dropoff in sales this month compared to June 2021. China’s not helping either, hampering the retailer’s business with lockdowns and a boycott of its products that’s led to the closure of its flagship store in Shanghai. H&M, then, is accelerating its growth elsewhere to offset these slowdowns, with plans to open 94 new stores this year.

HM sales
Source: H&M

Why should I care?

The bigger picture: A fashionista face-off.

Investors were just relieved to see that higher costs didn’t cripple H&M’s profit – something analysts have been warning about for months. But the company still has some way to go if it wants to beat main rival Inditex, which reported earlier this month that its quarterly profit was 80% higher than the same time last year. H&M has a plan to catch up: it’s aiming to keep its next round of price hikes smaller than those of its competition.

HM stock
Source: Google Finance

Zooming out: The ECB gets its gladrags on.

Low-cost clothes retailers like H&M and Inditex are made for moments like these, when inflation in Europe is spiraling out of control. Data out on Wednesday showed that Spanish inflation hit an all-time high of 10% this month, while Germany’s reading only eased thanks to its government’s temporary support measures. That suggests the ECB will still kick off interest rate hikes next month, with some economists pushing for an even more aggressive move than the planned 0.25%.

Europe inflation

Keep reading for our next story...

The EU Agreed A Deal To Push For Tougher Climate Measures

EU image

The EU agreed to a set of tougher climate policies on Wednesday.

What does this mean?

European countries have been announcing plans to replace now-absent Russian gas with coal, but it looks like they’re racked with guilt over the move. So after 16 hours of intense talks this week, the European Union agreed to tougher climate measures as part of the region’s goal to become carbon-neutral by 2050. Those measures include a crackdown on products linked to deforestation, a phasing out of permits that allow polluting industries a certain level of emissions, and a landmark deal to ban the sale of gas-fueled cars by 2035. None of this will be cheap, mind you, which is why the EU also agreed to a $60 billion fund to compensate the businesses affected most, as well as to help member countries green up their infrastructure.

Why should I care?

Zooming in: Take an inch, give a mile.

Campaigners aren’t so optimistic that the EU – the world’s third-biggest emitter of greenhouse gasses – will meet its goals, not least because of the concessions it made: the EU proposed allowing carbon-neutral fuels after 2035 so that members like Italy would sign the deal. Those so-called “e-fuels” are criticized for being almost as toxic as burning fossil fuels, not to mention for emitting as much poisonous nitrogen oxide as a traditional engine.

EU energy evolution

The bigger picture: Volkswagen’s dreaming.

The deal means most carmakers will be forced to produce EVs and EVs alone within the next decade. But Volkswagen’s already well and truly on that bandwagon, even saying this week that it was confident it could overtake Tesla to become the world’s biggest EV maker by 2025. It’s rubbing its hands with glee at the company’s current production problems, and thinks it can seize the chance to capitalize.

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