Costs even impact the battle between large fast-fashion players

Costs even impact the battle between large fast-fashion players

The battle between large fast-fashion players continues to evolve on the basis of the market. Inditex published record performances, but states that costs for investments will be higher than expected, and the stock prices struggle. The same goes for H&M’s shares. Sales results for the first fiscal quarter (December-February) were below expectations. Outside of Europe, e-commerce platform Shein has initiated legal actions against Temu, new US fast-fashion enterprise (that sells at an extremely low price).

What are big fast-fashion players doing

The record numbers of 2022 weren’t enough to push Inditex’s stock price up. The owner of Zara reached record sales (32.56 billion euro, +17%) and profits (4.14 billion euro, +27%) on 2022. All with the shutdown of activities in Russia and inflation, which caused a substantial increment in production costs. The company stated that sales from February to March 13th increased 13.5%. Even so, investors didn’t reward the stock. According to UBS, writes Il Sole 24 Ore, operating profits for the 4th quarter were slightly below expectations. Scheduled investments (1.6 billion) above expectations and the lack of a more generous dividends are factors that can temporarily weigh down on the stock price.

H&M misses

H&M’s stock suffers, and the reasons are clear. The Swedish company reported a sales’ increase below expectations: a sign that it’s fighting to compete with Inditex. Revenue during the first fiscal quarter (December – February) increased 3% to 54.88 billion crowns (4.9 billion euro). UBS states that results are aligned with the forecasts, while Jeffries says they are inferior and states that sales in February went down 3%. Additionally, H&M is being impacted by a programmed plan of personnel reduction and cost-cutting initiatives.

Shein vs Temu

A battle between Shein and new player Temu has kicked off, especially in the USA. The latter was launched by Pdd Holdings, parent company of Chinese e-commerce Pinduoduo and has experienced incredible growth. Shein, which plans to reach a revenue 60 billion USD in 2025 compared to 22.7 of 2022, has found a strong competitor in Temu. Shein should collect another 2 billion USD in financing this month, and has meanwhile filed a lawsuit against the Temu, accusing the latter to have denigrated Shein’s image. Specifically, influencers that went from sponsoring Shein to doing the same for Temu are allegedly making statements such as “no longer with Shein”.

Photo from Shutterstock

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