What's going on?
Swedish fashion chain H&M’s struggling to get customers through its doors – both physical and virtual. It’s stock fell by 4% on Friday after it revealed its sales hadn’t grown for the last three months. Åh nej…
What does this mean?
Investors had expected sales (excluding the effect of swings in the value of currencies) to grow by half a percent more than the same time last year, but were disappointed by sales not only failing to meet those expectations, but not growing at all. This was in striking contrast to Spain’s Inditex… the owner of Zara reported growing sales and profits on Wednesday, helping its stock to rise by 4%.
Why should I care?
The bigger picture: It’s all about speed to market.
Shoppers have always coveted the outfits they see on their favorite celebrities or on the catwalk (a trend called “see now, buy now”) – but as the world gets smaller and instant gratification gets easier to achieve (same day shipping, anyone?), they are increasingly wanting to get these styles quickly and affordably. The brands that can get them to their customers the quickest stand to gain the most from “fast fashion”. It takes Inditex about a month to get fresh styles into its stores, while H&M customers have to wait closer to six months – which may explain why H&M is struggling to grow its sales while Inditex is all the rage.
For you personally: Did somebody say sale?
Three months ago, H&M had almost $4 billion of inventory on its books. In this last quarter, the firm will probably have added even more to its inventory – or it would have a hard time trying to sell winter wares in summer! Facing no sales growth, the company might turn to discounting to get customers to buy (or risk having the value of its huge inventory written-down to zero if it goes out of style and no one wants it).