Street View: Signs of H&M's improved momentum a small mercy, Inditex's lead holds fast

ABOUT YOU Holding SE

15/09/2022 12:21

** Apparel giant H&M  HMb.ST  reports lower-than-expected Q3
sales as it struggles to compete with Zara owner Inditex
 ITX.MC   urn:newsml:reuters.com:*:nL8N30M10R
    ** On Wednesday, Inditex said it plans to hike prices again
after H1 earnings beat  urn:newsml:reuters.com:*:nL8N30L16R, while online retailer About
You  YOUG.DE  cut guidance night before on declining consumer
sentiment  urn:newsml:reuters.com:*:nL8N30L1AJ
    ** H&M stock slides 1.8% at 1041 GMT, after initially edging
up in early trading
    
BETTER MOMENTUM UNLIKELY TO OUTSHINE WEAK SPEND, MARGIN DRAG
    
    ** "This is a slightly weaker than expected update from H&M,
with a performance in stark contrast to that reported by Inditex
yesterday," J.P.Morgan says
    ** JPM notes H&M's comments on a better start to
autumn-winter sales are at odds with what others, like About
You, have said, which coupled with sales improvement through Q3
provides some encouragement for Q4
    ** Jefferies calls this increased momentum a "positive
surprise", though it is unlikely to assuage fears about consumer
health in key markets
    ** Similarly, JPM is "reluctant to extrapolate this" given
current volatility and weak outlook for clothing spend
    ** AlphaValue analyst Jie Zhang says H&M still lags Inditex
which "benefits from its industry-leading online offline
integration and more flexible business model"
    ** AlphaValue highlights Inditex's better margin generation,
more than 50% production in neighbouring countries, and greater
geographic exposure to sunny destinations
    ** RBC also points to "significant margin headwinds" for H&M
due to strong dollar and higher energy costs
    ** RBC prefers JD Sports  JD.L  and Hugo Boss  BOSSn.DE  in
European apparel on their sportswear and premium exposure,
respectively, and smaller USD sourcing exposure
    ** "We think the premium apparel space is proving more
resilient recently," RBC adds, saying this bodes well for Zara,
Hugo Boss and Next's  NXT.L  Reiss brand

 (Reporting by Jacob Rasmussen)
 ((jacob.rasmussen@thomsonreuters.com))