Zara, H&M, and Next Show Signs of a Mid-Pandemic Rebound

Positive signs from Inditex, H&M, and Next.

I owe an apology to some of fast fashion’s titans. Like Crocs and Outer Banks before them, I may have underestimated their appeal.

By the tags…

Inditex returned to profitability after an earnings scare—its first-ever loss—in June. The Zara owner bounced back with help from 1) a 74% jump in online sales and 2) the reopening of 98% of its stores.

H&M expects to post a profit in Q3, surprising analysts. H&M hasn’t shared full results yet, but signs from its stores are promising: Only 200 of its 5,000 stores remain closed and customers are coming back in droves. 

Next earned its Retail Brew debut after raising its guidance for the second time since the pandemic started. The U.K. brand anticipates generating roughly $388 million in annual profit, on the back of its “resilient” online business.

  • And it’s expanding, after acquiring the U.K. branch of Victoria’s Secret from L Brands.

A closer look 

It takes more than a well-timed sweatpants drop and a restaffed register to fully rebound in this economy. We’ve seen other apparel makers post losses despite sales gains in cozy clothing; in the U.S., overall clothing and accessories sales still declined 24% YoY in August. So what’s the fast fashion difference? 

Price. In a recession, shoppers generally prefer low cost over quality. Fast fashion retailers are structured to keep consumer prices below sea level. 

  • H&M also managed to reduce its reliance on markdowns throughout the pandemic, hitting the affordability sweet spot without further compromising its margins. 

Inventory management. This one’s specific to Inditex, but important. By the end of July, Inditex whittled down its stock in trade by 19% with the help of flexible suppliers. At the beginning of the pandemic, Inditex used advanced tech to funnel clothing from closed stores to e-comm; with room to adjust orders as demand shifted in real time, it also reduced unsold skus. 

Bottom line: It’s too early to say that fast fashion has 100% recovered. But as every apparel maker tries to jump on the same quarantine trends, fast fashion is pulling ahead.

Via Morning Brew

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