Sun shines on Asos as Inditex and H&M feel the chill

Unseasonable weather leaves spring collections unsold

Spain’s Inditex, which owns the Zara chain, posted its weakest quarterly growth in net profit in four years

Spain’s Inditex, which owns the Zara chain, posted its weakest quarterly growth in net profit in four years

Wed, Jun 12, 2013, 20:22

Cold weather in recession-weary Europe left spring collections on the racks of the world’s biggest clothing retailers, Inditex and H&M, while small British rival Asos beat the seasons with soaring demand for its cost-conscious online offering.

Spain’s Inditex, which owns the Zara chain, posted its weakest quarterly growth in net profit in four years. A cold spring and early summer did little for sales of summer wear going into the second quarter. Its shares slipped 1 per cent.

The group posted a 2 per cent rise in first-quarter net profit on sales up 5.2 per cent. Societé Générale analyst Anne Critchlow said this was equivalent to flat like-for-like sales, stripping out new stores.

Inditex has outpaced rivals in recent years, but investors were poised for signs that sales growth is slowing after aggressive expansion into markets like China and Russia to sharply reduce exposure to its struggling home market Spain, where unemployment, especially among the young, has hit retailers.

“The question for the incremental buyer is whether Inditex can enjoy another year of good execution on top of the exceptional 2012, and we don’t see current trading as much comfort,” said Christodoulos Chaviaras at Barclays Capital.

With 80 per cent of sales from Europe, Sweden’s H&M, due to publish full quarterly results on June 19th, has been hit harder by the region’s economic downturn than Inditex.

The group posted unchanged May same-store and fiscal second quarter net sales yesterday, just missing expectations. H&M has seen margins fall due to currency swings and long-term investments. H&M shares were down 0.5 per cent.

Asos stock, however, leapt 3.5 per cent after it posted a 45 per cent rise in its third-quarter sales, with robust growth in Britain. The online retailer is expanding into Russia and China and recently signed a deal with budget fashion chain Primark to sell its cheap womenswear on its website. – (Reuters)