Fashion Retailers Demonstrate Resilience Despite Consumer Apprehensions
Recent positive developments in the fashion retail industry, such as Sweden’s H&M’s strong performance in June and the return to profitability of online fashion retailer ASOS, have alleviated concerns surrounding a sector that has been impacted by weakened demand in the United States.
Investors had been worried that economic uncertainties were causing consumers in key markets like Europe, the U.S., and China to reduce their spending on clothing. However, the resilience displayed by these fashion retailers has provided some relief.
H&M’s shares rose by 6% as analysts predicted a stronger third quarter following a period of flat sales from March to May. The company has been focusing on enhancing its fashion appeal and expanding its higher-priced brand Cos, targeting customers who are less affected by rising living costs. H&M has faced competition from fast-fashion giant Shein, which has been gaining market share with its inexpensive clothing. Analysts from Bank of America highlighted that H&M’s successful collaboration with luxury brand Mugler could contribute to improved earnings in the first half of the year.
ASOS, which has been working to recover from a significant increase in inventory and debt, heavily relies on young shoppers who seek the latest trends at affordable prices. Despite experiencing a decline in sales, ASOS stated that its emphasis on profit per order has yielded positive results. The online retailer, affected by a shift of consumers back to physical stores after the pandemic, has reduced its stock by 15% since the beginning of the year and is removing unprofitable brands from its platform.
The divergent performance of various brands in this uncertain environment is evident, with premium fashion retailer Hugo Boss reporting strong growth in the U.S., even as other retail and luxury peers indicated weakness among “aspirational” shoppers in the region. Citi analysts noted that Hugo Boss has remained immune thus far, despite visible cracks in the U.S. consumer environment and, to a lesser extent, in Europe.