Sweden’s H&M got off to a strong start in June, while online fashion retailer ASOS turned profitable, pushing a sector hit recently by weaker demand in the U.S. My concerns about receiving it have eased. The signs of recovery have come as a comfort to investors worried that economic uncertainty is causing shoppers in major markets such as Europe, the United States, and China to spend less on clothing.
H&M shares surged 6% as analysts expected a stronger third quarter after flat sales in the March-May quarter. H&M, which is lagging behind ZARA owner Inditex, is boosting its fashion appeal, targeting shoppers like fast-fashion giant Shane, who are less susceptible to rising living costs. It gains market share with cheap clothing.
Analysts at Bank of America said the sell-out of H&M’s partnership with luxury brand Mugler could also help boost first-half earnings expected on June 29. ASOS, which is trying to recover from a sharp increase in inventory and debt, is also highly dependent on young shoppers who want the latest trends at low prices. Sales declined, but the focus on profit per order paid off.
The online retailer, strained by the pandemic’s return of shoppers to physical stores, said it has cut inventory by 15% since the beginning of the year and removed unprofitable brands from its platform. “Our experience in the current retail environment shows that when you develop products that resonate with your customers and are priced appropriately, full price sales are very strong,” he said
Luxury fashion retailer Hugo Boss cites mixed successes for different brands in this uncertain environment, with retailers and luxury goods competitors reporting weakness in the US. Nonetheless, he said he expects “ambitious” growth in the U.S. to continue. “There are clear cracks in the consumer environment in the US and, to a lesser extent, in Europe, but Hugo Boss has so far been unaffected,” said Citi analysts.