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Fast-fashion retailers are seeing falling full-price sales, led by H&M and more recently, Zara.

To-the-point analysis about one of the five important stories from the week.  

What happened

  • Analysts were already concerned with Zara’s biggest competitor, Hennes & Mauritz AB (H&M), whose inventory was higher in 2017 than in the past 20 years, but whose profits hit a six-year low. While in 2018, the company will close more stores and open fewer than in recent years, it isn’t up to speed on the ecommerce front and is banking too heavily on its new off-price store, Afound, which isn’t going to offset depleted margins.
  • Now the same might be happening to Zara. The company’s inventories are rising, which might force it to discount more heavily moving forward.


Why it matters

  • One of the core benefits of fast fashion is that the trend cycles often lead to tight inventory control and high sell-through. However, Zara’s share of full-price sales is decreasing, a worrying sign for its margins and its ability to put the right product in front of shoppers at the right time.
  • As recently as December 2017, Inditex was outpacing H&M, which, at the time, experienced its largest drop in quarterly sales in at least a decade. But now, fast-fashion digitally-native brands like ASOS and Boohoo are outpacing both, unimpeded by brick-and-mortar retail. These digital fast-fashion brands can move around inventory more nimbly than their offline competitors, and Zara might be catching up to its delayed investments in ecommerce.

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