Saturday, January 29, 2022

Zara owner and H&M bounce back from pandemic blues

Companies are battling to source products and raw materials in a robust global economic recovery as the pandemic continues to disrupt everyday life in parts of the world.

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Sales at Zara-owner Inditex and rival H&M are back at pre-pandemic levels or better, as the world’s top two fashion retailers ride a recovery in demand despite supply chain challenges.

Spain’s Inditex, the world’s largest fashion retailer, said on Wednesday sales at constant currencies were up 10% on 2019 levels in the quarter to the end of October, and had continued at that rate up to Dec 10, helped by strong online demand.

Smaller Swedish rival Hennes and Mauritz (H&M) said sales in local currencies matched pre-pandemic levels from September through November.

“The recovery continues to gain momentum,” Inditex’s Capital Markets director Marcos Lopez said in a statement.

Companies are battling to source products and raw materials in a robust global economic recovery as the pandemic continues to disrupt everyday life in parts of the world.

Inditex, whose brands also include Massimo Dutti, Bershka and Pull & Bear, produces more than half of its products near its base in Spain and delivers them to consumers faster than rivals, sparing it the worst of the supply chain crisis.

The Spanish company reported sales of 7.3 billion euros and net profit of 1.2 billion euros from August-October, the third quarter of its financial year, in line with analysts’ expectations.

It said online sales for the first nine months of its fiscal year were up 124% on the same period of 2019, and that it expected them to account for more than 25% of the total over the full year.

However, Credit Suisse analysts said the company’s gross margins were slightly weaker than expected.

Shares in both Inditex and H&M were down around 2% in early trading.

Inditex is embarking on a change in senior management, with Marta Ortega, a daughter of the company billionaire’ s founder Amancio Ortega, taking over as chair next April.

“We can say that it is a very healthy evolution of the business globally,” said Pablo Isla, who will serve as Inditex executive president until March 31.

“We have total confidence in our unique business model,” he added in a online call with analysts.

Disruptions

H&M said its net sales totalled 56.8 billion Swedish crowns (US$6.22 billion) in September-November, its fiscal fourth quarter.

“Customers are showing that they appreciate the collections and being able to shop where, when and how they choose,” it said.

However, the Swedish group said its business continued to be affected by the pandemic.

At the end of November, around 115 H&M stores were temporarily closed due to restrictions, mainly in Austria and Slovakia. At the start of the quarter, about 100 had been closed, mainly in southeast Asia.

Inditex said all of its 1,975 stores are now open.

H&M warned on Sept 30 that sales growth in September was held back by global supply chain disruptions but did not mention the issue in Wednesday’s statement. The company is due to publish its full fourth-quarter earnings report on Jan 28.

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