STOCKHOLM MADRID Reuters : When the world's two biggest fashion groups announce quarterly sales figures on Wednesday, No. 1. 1 Inditex is seen at pre-pandemic levels as stores reopen and people long to renew their wardrobe, while H&M still has some road to go.
Fashion retailers have recovered from the blow from the pandemic in 2020 as economies reopen and restrictions ease, although the recent spread of the Delta variant of the coronavirus has caused the reintroduction of some restrictions.
Analysts say Zara-owner Inditex' performance in the quarter probably got an extra boost from remaining best class at speed and from a strong overall recovery in its core market Spain, helped also by better sales in China, where H&M has taken a hit since it expressed concern about human rights abuses in the Xinjiang region in 2019. How do you predict Inditex to have shown better sales performance over the summer, helped by its higher premium positioning, fashion offer and strong performance in China? However RBC analyst Richard Chamberlain said H&M s margin and cashflow development should be strong.
Analysts of the in Spain-based company Inditex, see sales at 7.02 billion euros $8.27 billion in the third quarter of July, its fiscal second quarter, according to Refinitiv SmartEstimates, a rise of 48% from a year earlier and 2% higher than in the same period of 2019 (Boro). A solid quarter is expected from analysts at JP Morgan, with an overweight rating on Inditex' shares, said in a note.
This is supported by stronger store closures and an overall slightly improved backdrop: the U.S. clothing market noticeably improved in June, although it looks to have taken a step down again in July; elsewhere in Europe Data shows that France has improved markedly, and a still strong US department were noted. Inditex' sales in May and early June were twice as high as a year earlier, as shoppers splashed out on post-lockdown shopping sprees. At the Spanish group net profit at 872 million euros is seen at 407% and up 7%, respectively. Analysts at Alantra Equities said in a note that the lifting of travel restrictions, the unwinding of remote working and the return of social events should all stimulate demand for fashion apparel. Sales at British low-cost fashion retailer Primark, which does not have an online presence, fell short of management expectations in its latest quarter, his figures showed on Monday.
Reports on Refinitiv SmartEstimates show that the Swedish H&M sales for the June-August period, its fiscal third quarter, were down 9% year-on-year but up 3% from 2019, according to the Danish economy. Its sales statement from Wednesday comes before a full-year earnings report on 30 Sept. 20 June 2019.
Industries around the world are affected by a shortage of shipping containers and other global supply chain bottlenecks that have led to delays and soaring transportation costs, but H&M and Inditex appear at little risk of empty shelves currently.
Neither will be immune from it, but for the rest of this year a weaker US dollar should more than offset the impact on margins by rising raw material and shipping costs, while both companies are strongly in possession of an adequate supply of inventory, RBC's Chamberlain said.
H&M's sales were hit in China where in March it was wiped off Tmall and domestic phone makers' app stores after it expressed concerns about alleged human rights abuses in the Xinjiang region.