The world’s two largest fashion retailers posted results today, and as Zara’s parent company, [hotlink]Inditex,[/hotlink] raked in record-high profits, those of Sweden’s Hennes & Mauritz (H&M) fell below expectations.
While their stores are often located 100 meters apart from one another, only Inditex has managed to recover from the pandemic, aided by an earlier turn toward integrating its online and brick-and-mortar stores.
In the summer-season quarter from May through July, Inditex recorded €6.99 billion ($8.27 billion) in revenue and surpassed its pre-pandemic summer high, pushed forward by the return of consumer demand and growth in its online sales.
Meanwhile, sales from H&M Group, which owns a suite of other brands including Arket, Cos, & Other Stories, and Weekday, grew less than expected from June through August as restrictions kept shoppers away from stores, rising only 9% annually to SEK55.6 billion ($6.46 billion).
Net sales at the Swedish group were down 11% from the same quarter in 2019, before the pandemic, while the Spanish group recorded a 7% rise from its 2019 summer sales.
And while both stores were equally crushed at the onset of the pandemic—Zara shuttered 95% of its stores, and its famously responsive supply chain wrote off €287 million in inventory in March 2020—Inditex invested €2.7 billion in the technological integration of its online and in-store shopping, which seems to have paid off.
Using radio-frequency identification chips to further streamline its supply chain and stock system, Inditex managed to boost its online sales for the first half of the year by 36% from the same period in 2020, and 137% when compared with 2019.
H&M also began intensifying its efforts and investment to build out a similar omnichannel and online space in May 2021, something it noted did increase online sales.
“Lockdowns and restrictions have continued to hamper development, particularly in Asia. However, as restrictions have been eased, sales in store have picked up in many markets while online sales have continued to increase,” H&M said.
Analysts foresee continued recovery for H&M as restrictions further ease. “In several markets where there are no restrictions, H&M is experiencing a positive sales development versus 2019,” Berenberg analysts said in a recent note, “which gives management confidence in recovery as restrictions are lifted elsewhere.”
Despite this, the analysts note that the increased disruption depressed trading, and they have lowered their forecasts to capture disruption from European lockdowns and China.
In early trading Wednesday, shares in the two retailers did not track their respective performances: H&M shares fell 3% while Inditex slid as well, falling 2%.