Inditex and H&M face challenges and growth – Business – Kommersant
[ad_1]
The Inditex Group ended 2022 with a record profit. Its main competitor, H&M, also presented preliminary data on revenue for the quarter – it ended it less successfully. Both companies are benefiting from a post-pandemic trade recovery while facing rising commodity prices, declining customer purchasing power and competition from even cheaper clothing manufacturers.
Today, March 15, the Spanish company Inditex, which owns the brands Zara, Pull & Bear, Massimo Dutti, Bershka and others and is the world’s largest clothing retailer, introduced reporting for the fourth quarter and fiscal year 2022 ended at the end of January.
Investors have been particularly eyeing Inditex’s current results as this is the first year it has been run by Marta Ortega Pérez, daughter of the group’s founder Amancio Ortega.
The company’s revenue for the year increased by 18%, amounting to €32.6 billion. Thus, it was also 15% higher than the level of the pre-pandemic 2019. Inditex ended the year with record revenue of €4.1 billion, up 27% from 2021. The company’s quarterly revenue increased by 13%, to €9.5 billion, and net profit – by 37%, to €1 billion. The company’s shares rose after the publication of financial statements by 1.4%.
Today, Inditex’s main competitor, the Swedish company H&M, published preliminary data on sales in the first quarter (.pdf) ended at the end of February. Its revenue grew by 12%, amounting to 54.9 Swedish kronor ($5.3 billion). H&M will release full financial statements for the quarter on March 30th. Sales data were worse than analysts’ expectations, so H&M shares on the Stockholm Stock Exchange fell 8.4% on Wednesday.
Recently, the company has consistently shown worse results than its competitor. In 2022, the company’s net profit fell by 68%, to $346 million, and revenue was 4% below the pre-pandemic 2019.
Now H&M is restructuring, which was announced in November, it should save the company $190 million a year. In particular, it laid off 1.5 thousand employees.
Both companies are benefiting from a rebound in trade as the COVID-19 restrictions are lifted in 2021. At the same time, both of them are facing rising prices for raw materials and a decrease in the purchasing power of customers in an inflationary environment.
Another pressure on market leaders is intensifying competition from companies such as China’s Shein, which produce even cheaper and faster-changing clothes than Inditex and H&M. This hits H&M especially hard, because, unlike Inditex’s portfolio, which includes clothing brands in a higher price category, the Swedish company’s range is extremely budget-friendly.
“Inditex is better able to withstand price increases as its customers are less price sensitive, while H&M is in more direct competition with cheaper players like Shein,” said Nicholas Champ, retail analyst at Barclays bank.
[ad_2]
Source link
