Zara and H&M illustrate uneven recovery for high street retailers

Wed, 15 Sep, 2021 - 15:26

High street retailers are showing uneven levels of recovery from the Covid crisis, with Zara owner Inditex rebounding to pre-pandemic sales levels, but H&M still suffering.

Zara owner Inditex rebounded with an €850m second-quarter profit as sales topped pre-pandemic levels, outshining Swedish rival H&M.

The world's biggest fashion retailer's sales bounced back and slightly surpassed the level seen before the pandemic as most stores reopened and people rushed to renew their wardrobe after store closures imposed to curb the spread of the virus.

The Spanish company's second-quarter net profit was higher than the €214m booked in the same period in 2020 and 4% higher than the profit in 2019.

Swedish rival H&M, the world's second-biggest fashion retailer, said sales grew less than expected from a year ago in the three months through August, and remained lodged below pre-pandemic levels.

Although fashion retailers are recovering from the impact of the pandemic, the recent spread of the Delta variant of the coronavirus means some restrictions have been reintroduced, while many industries face supply problems due to a shipping container shortage and other bottlenecks.

Summer spend

Inditex said sales accelerated in the May-July period to €6.99bn, 7% higher than in the same period in 2019, as shoppers started buying clothes again for summer social events to enjoy their new freedoms made possible by vaccination campaigns.

Analysts said consumers have shifted their spending recently to focus on fashion workwear as big cities slowly return to normality and most lockdowns are lifted, a trend which is benefiting large fashion retailers such as the Inditex brands.

During the pandemic, Inditex strengthened its digital retail platform and shut its smaller outlets worldwide in favour of expanding flagship stores able to function as mini distribution hubs.

Inditex online sales rose 36% in the first half compared with the same period in 2020.

H&M said sales grew 9% from a year earlier, in the three months to the end of August, to 55.6 billion crowns (€5.5bn). Net sales for its third quarter were down 11% from the same quarter of 2019 before the pandemic, when they were 62.6 billion crowns.

H&M said the pandemic continued to hit sales, with considerable variation between markets.