8 months ago • 2 mins
What’s going on here?
H&M, the mammoth retailer, had a moment of triumph this Thursday, bagging a win in the increasingly contested clothing world.
What does this mean?
H&M’s been knee-deep in unsold clothes since 2016 – but last quarter, things seemed to be turning around, with inventory levels dipping to their lowest since the pandemic. And the best part? The firm did it without offering any extra promotions. Its ongoing cost-cutting campaign is bearing fruit too: the clothing giant has closed hundreds of underperforming stores in the past year, and decided to open new ones only in high-potential “growth markets”. Sun-struck Europe added to all that positivity as well, with a heat-induced boost in summer clothing sales. The upshot was that H&M wound up beating profit expectations – and with a 10% sales jump in June, the good times might keep on rolling. Investors, ever predictable, swiftly drove H&M shares to a 16-month high.
Why should I care?
The bigger picture: Time to Shein.
H&M is still playing catch-up with its arch-rival Zara, but the two firms have a shared concern: the Chinese fast-fashion juggernaut, Shein. With consumers tightening their belts, Shein is eating into their market share, and H&M’s responding by trying to boost the appeal of its higher-priced offerings instead. That strategy puts the company even more at loggerheads with Zara – but with a shrinking pie, tough decisions have to be made. After all, Shein’s growth has already made H&M’s aim of doubling sales by 2030 look like a pipe dream.
Zooming out: Dirty laundry.
Fast fashion’s a big polluter: see, the industry relies heavily on materials like oil-derived polyester and water-hungry cotton. And with clothing production doubling while the population has increased by around 30%, it seems the world’s shoppers are buying a whole lot more than they need. That’s brought fashion’s share of global carbon emissions to almost 10% – suggesting that sustainable fashion initiatives have seriously got their work cut out for them.
Disclaimer: These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment advisor.