Not surprisingly, the pandy triggered sales to fall at retail goliaths Inditex and Hennes & Mauritz (H&M) in November, stifling any chance of a swift recovery and emphasizing the very different online sales performance between the two companies. Shares in both shops fell in European trading, with Inditex, which owns Zara, trading 2% lower and H&M dropping more than 2% on Tuesday.
As virus infection rates hit the breaks throughout the summer and government restrictions were relaxed, shoppers hurried back to stores after months of retail closures. Both Spanish Inditex and Swedish H&M—the largest and second-largest fashion chains on the planet, respectively—returned to profitability in the fall after yuge losses.
With the shutdowns keeping shoppers at bay, Inditex has made a key investment in growing online shopping. In June, the company announced a €2.7 billion ($3.28 billion) investment plan to boost online operations and expand the store footprint, of which €1 billy was designated for digital investments. H&M, still controlled by its founding Persson family, was already struggling before the virus hit. The company has been slower to shift to online shopping in favor of its more than 5,000 stores and the low-cost fashion strategy it helped pioneer. Is Adidas Going To Sell Reebok?
Both companies reported earnings on Tuesday—Inditex for the three months to the end of October, and H&M for the quarter ending November 30 as well as the full year. Store and online sales grew slowly from August to October at Inditex, with October sales at 94% of 2019 levels. In total, net sales of €6.1 billion in the third quarter were 14% lower than the same period in 2019. However, as coronavirus cases surged in November, 21% of stores remained closed and sales dipped to 81% of 2019 levels.
At H&M, net sales for Q4 were 10% lower from the same period last year. Much of that came in the final month: sales were down by just 3% YOY from September 1 to October 21, but were 22% lower than 2019 in the period from October 22 to November 30. The results from the retail giants show the impact the second wave of the virus has brought on sales. Fears over how much this hurts the bottom line for the full year is what may have caused both stocks to decline. Nike Earnings Expectation: Yuge
Results shed light on the companies’ different online strategies—a critcal sales platform beyond the pandemic. Inditex reported that online sales grew 76% in the nine months to the end of October, while analysts expect H&M to lag far behind. The Swedish retailer didn’t post any fresh online figures on Tuesday. It had posted online sales growth of 40% Q2 and just 27% in the third.