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  • Forever 21's Woes Show Fast Fashion's Limits

    Forever 21's Woes Show Fast Fashion's Limits

    (Bloomberg Opinion) -- Forever 21 Inc. has learned the hard way that the allegiance of teen shoppers is anything but everlasting.The fast-fashion retailer filed for bankruptcy late Sunday, saying it has obtained $350 million in financing to help it stay afloat. The company said it plans to close most of its Asian and European stores in order to focus on its core business in North America.The bankruptcy is, of course, another signal of the punishing pressures of the broader “retail apocalypse,” in which the rise of e-commerce is siphoning away shoppers from brick-and-mortar chains, forcing them to collectively shutter thousands of stores. But Forever 21’s troubles also are an emblem of a new and important dynamic shaping the U.S. apparel market: Fast fashion, once a formidable retail niche, is falling behind.In the first two decades of the 2000s, the trifecta of Forever 21, H&M and Inditex SA’s Zara had punishing impact on mid-priced mall heavyweights such as Gap Inc., Abercrombie & Fitch Co. and American Eagle Outfitters Inc., stealing away the high school and college set by peddling trendier garments and refreshing their merchandise offerings at a much quicker pace. The Great Recession helped support their rise, as it meant shoppers were especially focused on low prices.Now, though, there are clear signs that some shoppers are souring on this model. Forever 21 and others of its ilk have long been go-tos for what is essentially disposable clothing – a trend you’re sure will be fleeting, an outfit you don’t want to be seen in more than once on Instagram, etc. But just as sustainability concerns upended the food and beauty industries years ago, they are starting to factor more into clothing purchases. And it could contribute to a backlash to what was essentially a years-long binge on cheap polyester.To the extent that many shoppers are still embracing fast fashion, there are now many more options for them to scratch their itch for of-the-moment clothing than when Forever 21 was gathering steam. Chains such as Gap, Old Navy and Urban Outfitters Inc. have sped up their supply chains to be more reactive to new trends. Plus, many chains including Ann Taylor, Express and Bloomingdale’s are now joining upstart Rent The Runway in the clothing rental business.Digital-centric players such as Boohoo, Fashion Nova and Asos have given them fresh options, and low-priced, U.K.-based brick-and-mortar chain Primark is starting to open U.S. stores. On top of that, digitally-enabled secondhand selling is gaining traction. The stock market debut of The RealReal Inc. and Foot Locker Inc.’s $100 million investment in sneaker re-seller Goat were signals of the strong expectations of growth for this model. Simply put, there are more options now for having a constantly-refreshing wardrobe that don’t necessarily depend on fast fashion. All of those changes are making it difficult for Forever 21 to stay relevant. In fact, the collective U.S. market share of the Big Three of fast fashion peaked in 2015, according to data from Euromonitor.Of course, Forever 21’s bankruptcy also is a result of other factors, including the pace at which it opened stores and its decision to have so many of them in enclosed malls. But the chain’s troubles signal a new era of opportunity for capturing the dollars of Generation Z and millennial shoppers. Its struggling neighbors at the mall should take note.–Andrea Felsted contributed the “Rental on the Rise” chart. To contact the author of this story: Sarah Halzack at shalzack@bloomberg.netTo contact the editor responsible for this story: Beth Williams at bewilliams@bloomberg.netThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Sarah Halzack is a Bloomberg Opinion columnist covering the consumer and retail industries. She was previously a national retail reporter for the Washington Post.For more articles like this, please visit us at©2019 Bloomberg L.P.

  • India Offers a Bargain: Our Consumers, Your Jobs

    India Offers a Bargain: Our Consumers, Your Jobs

    (Bloomberg Opinion) -- The beleaguered Indian economy is finally making a sensible bargain with the rest of the world: “Take our billion-plus customers, give us jobs.”Under a new foreign direct investment policy announced by Prime Minister Narendra Modi’s government Wednesday, India is undertaking its biggest liberalization of single-brand retail in seven years. One major concession: Contentious local sourcing requirements will need to be met as an average for the first five-year period, not annually.That’s a big help to Apple Inc., which will no longer have to struggle with a 30% local procurement norm to open its long-awaited own store in India and will now have time to scale up what it buys from Taiwanese contractor Wistron Corp.’s Bangalore factory.Nor will it be necessary for companies to back every dollar of Indian revenue with 30 cents of domestic sourcing. The likes of Ikea or H&M already source from India for their stores globally. But now they’ll get credit for it. Ikea, for instance, has previously said that it might be buying $667 million in furnishings, furniture and trinkets from India by 2020. Under the new rules, it can then sell goods worth $2.2 billion in India annually – even if all of it is made in China or Bangladesh. If it wants more headroom for expansion, it needs to buy more from the country for international markets.Similarly, Apple, which tests the assembly of its latest iPhone X in a Foxconn Technology Group factory near Chennai, can step up the engagement to include other devices it sells globally.The reforms have been years in the making. Beset by corruption scandals and accusations of policy paralysis, the previous prime minister, Manmohan Singh, had risked splintering his unwieldy coalition government in 2012 to open up the closely protected consumer market, paving the way for Ikea to finally open its first store in India in 2018 – after a 12-year wait.Singh’s reforms came too late. By the summer of 2013, investors were making a beeline for the exit. His government fell the next year. The situation now has differences and similarities. Having just returned for a second term with a thumping majority, Modi is far more secure politically. But the economy is once again floundering. Six out of eight high-frequency indicators tracked by Bloomberg worsened in July. Auto sales are crashing and a crisis of confidence in the financial industry is threatening to spiral out of control.With unemployment at a 45-year high and consumption sputtering in rural areas, the three export-oriented industries that can create the most jobs for the country's bulging youth population are textiles, electronics and auto. Multinationals that want a slice of India's spending are being told to help expand the middle class first.As I wrote recently, New Delhi is no longer in denial, though it doesn’t have a good strategy to counter the slowdown.The pragmatic stance taken on retail is the first good step that goes beyond damage control and toward filling a strategic gap. To sweeten the deal some more for Apple, New Delhi will allow it to sell online to Indian device buyers as long as the Cupertino, California-based company opens a physical store in two years. An online store for India is something Apple is poised to start within months, Bloomberg News reported Thursday.Apple’s eagerness is easy to explain. For one thing, the damage being done to the iPhone’s brand premium through heavy discounting by resellers on marketplaces run by Inc. and Walmart Inc.-owned Flipkart will be contained. India is the world’s fastest-growing smartphone market and Apple’s share is less than 2%. However, while demand for $400 to $600 smartphones is currently modest, this top end of the Indian market is still growing at a rapid 16% rate.To play freely, what can Apple make in India and export to the world? For now, some amount of software (something India is good at) and assembly and packaging of devices may have to suffice.India isn’t really plugged into the global electronics supply chain. The trade war between Washington and Beijing is reshaping things, but those leaving China are more inclined to relocate to Vietnam, where Google may move production of its Pixel smartphone, according to Nikkei. To make a success of the new retail policy, India must shed its notorious reputation of being an exporter-unfriendly place.Importing components to re-export finished goods is a customs nightmare. For example, the  government may deny a waiver of import duty if what came into the country were tires and an axle and what went out was a trailer. With less red tape, and even small improvements in infrastructure, India’s customers-for-jobs bargain could start to pay off.To contact the author of this story: Andy Mukherjee at amukherjee@bloomberg.netTo contact the editor responsible for this story: Patrick McDowell at pmcdowell10@bloomberg.netThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Andy Mukherjee is a Bloomberg Opinion columnist covering industrial companies and financial services. He previously was a columnist for Reuters Breakingviews. He has also worked for the Straits Times, ET NOW and Bloomberg News.For more articles like this, please visit us at©2019 Bloomberg L.P.

  • Pampers Price Hikes Hold a Lesson for the Gap

    Pampers Price Hikes Hold a Lesson for the Gap

    (Bloomberg Opinion) -- Shares of Procter & Gamble Co. reached an all-time high this week after the company released a blockbuster quarterly earnings report. Organic sales – a measure that strips out currency movements and other factors – were the highest in more than a decade, with each of its major divisions posting at least mid-single digit growth from a year earlier on this measure. An upbeat sales and earnings forecast for 2020 capped off the win.It’s a remarkable change in momentum for a consumer-goods behemoth that only a year ago was licking its wounds after a bruising proxy fight and was desperate to show it could do better amid tough competition from insurgent and private brands.So how did P&G do it? Many factors, including a new organizational structure and revamped marketing strategy, are playing a role. Importantly, though, it’s also done a good job of figuring out how to get shoppers to pay more for its products. It’s here that I want to focus, as there are some lessons in what P&G has done for another corner of the consumer world – the apparel industry – which badly needs to do the same thing.One way P&G has gotten consumers to splurge is through product innovation. Pampers Pure – a version of its familiar diaper that is made with plant-based and sustainable materials – has helped lift sales recently in its baby division. This product, new to the market in 2018, capitalizes on consumers’ growing preference for eco-friendly products while also giving the company a reason to charge a premium price. This year, it followed up with Pure products in its Always and Tampax brands.Higher-priced items have also been driving strong growth in its laundry division. Tide Pods and Gain Flings carry a 50% price premium compared to liquid detergent, and yet shoppers scoop them up because the format offers obvious convenience.Here’s why I think the apparel industry should pay attention to this dynamic, even though selling consumer staples is a somewhat different beast. Chains such as Gap Inc., Ann Taylor and Macy’s Inc., have become over-reliant on discounts, which can cheapen their image and hurt margins. Lately, their approaches seem to largely center on using technology to present more personalized deals, or to introduce fresh loyalty programs as a way to offer value. And it hasn’t done much to return them to relevance.What if, instead, they focused on product innovation, like P&G does, to get people to pay full price? In apparel, there are at least a couple of ways to do this.One is working to develop garments with clear functionality or performance advantages, such as a white t-shirt that isn’t see-through or pants that don’t shrink in the wash. This, in fact, is how  Lululemon Athletica Inc.  has become a rare bright spot in the clothing business. Women are willing to pay $98 for its leggings because its distinct fabrics and designs result in a comfort and durability that shoppers deem worth the price tag. No wonder the athletic apparel retailer has booming sales and practically never discounts.Product innovation could also mean fashion newness – creating pieces that people simply feel like they have to have. As Andrea Felsted and I noted in a recent column, Inditex SA’s Zara does it all the time. J. Crew Group, for all its current woes, managed to win with fashion innovation during the apex of the Mickey Drexler-Jenna Lyons era, when its sequins-as-daywear and oversize necklaces became a go-to look every chain was forced to imitate.It isn’t just product innovation, though, that has allowed P&G to win with pricing; it has also raised prices on existing items under banners such as Bounty, Charmin and Puffs as it has sought to offset elevated commodity costs. In some ways, this is a risky move, as private-label brands are there as a cheaper alternative.Here’s the thing, though: P&G is fond of saying “performance drives brand choice.” In other words, executives trust that, for all but the most budget-conscious shoppers, people are going to be loyal to the product they think works best.Clothing sellers should consider embracing this philosophy. Mid-priced apparel chains appear to be battle-scarred by two factors: the recession that ended a decade ago, and the concurrent competitive incursions from value-oriented players such as H&M operator Hennes & Mauritz AB and TJX Cos., owner of the T.J. Maxx chain. That confluence of events seemed to spook them into believing that the only thing that would ever get shoppers to open their wallets is discounts.I don’t think that’s true. In today’s upbeat economy, I am confident plenty of once-devoted Banana Republic, Loft or Express Inc. shoppers would pony up for work attire they perceived to be durable, or for a date-night dress they thought was a knockout. The mental calculus wouldn’t be so different from why that same woman springs for Charmin even when the generic toilet paper is right next to it on the shelf: It performs better, so it’s worth the cost.Mall-based clothing chains are in a rut. It’s high time for some more creative thinking – and perhaps some unusual inspiration – if they’re going to dig out of it.To contact the author of this story: Sarah Halzack at shalzack@bloomberg.netTo contact the editor responsible for this story: Beth Williams at bewilliams@bloomberg.netThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Sarah Halzack is a Bloomberg Opinion columnist covering the consumer and retail industries. She was previously a national retail reporter for the Washington Post.For more articles like this, please visit us at©2019 Bloomberg L.P.

  • Amazon Taps Kobe Bryant and Other Celebs to Generate Prime Day Buzz

    Amazon Taps Kobe Bryant and Other Celebs to Generate Prime Day Buzz

    (Bloomberg) -- Will Smith is selling water. Kobe Bryant is pushing deodorant. Mark Wahlberg is peddling protein powder. YouTube star JoJo Siwa, known for wearing big, colorful hairbows, is hawking, well, big colorful Inc. is tapping high-profile actors, athletes and social-media sensations like never before to maintain buzz around its Prime Day summer sale, now in its fifth year and battling increasing competition from rivals.Discounted pressure cookers and gadgets just aren't enough to stand out when shoppers can find a flurry of bargains elsewhere. Walmart started a competing four-day sale on Sunday. Target is emphasizing sales on its exclusive clothing and home goods shoppers can’t buy on Amazon. EBay is taunting last year’s Prime Day website outage with a “Crash Sale” offering deals on smartphones, electronics and fashion. And all of them are emphasizing that their deals don’t require paid membership like Amazon. Some 250 retailers are staging their own sales to compete with Prime Day, up from 194 last year, according to research firm RetailMeNot.So Amazon last week promoted its two-day event beginning July 15 with a Taylor Swift concert and is pushing celebrity-backed merchandise targeting every demographic to keep Prime Day flourishing in headlines and social media. So far it appears to be working.The sale generated about 12 billion media impressions—views of television and online content about the day—as of Friday, according to Stacy Jones, who runs the entertainment marketing agency Hollywood Branded. That's about the same as for the deal H&M struck with Netflix to sell 80s-style clothing featured in its hit show “Stranger Things,” she says.Shoppers will spend $5.8 billion on Amazon over the two days, according to Coresight Research. That’s an 11% increase from last year’s 36-hour sale when converted to spending per hour. “Amazon is giving these celebrities the opportunity to sell their brands on a very powerful platform,” Jones says.The celebrity focus shows how much Chief Executive Officer Jeff Bezos—now tabloid fodder himself in the wake of his high-profile affair and divorce—has changed his thinking about the value of celebrity promotion. Amazon historically relied on customer reviews, which don’t cost anything, to sell products rather than million-dollar pop star endorsements.A tipping point came in 2016 when Bezos was eager for the public to embrace the new Echo speaker, which  popularized Amazon’s Alexa voice-activated digital assistant. The company splurged on its first Super Bowl commercial starring Alec Baldwin and Dan Marino; it became a big hit, prompting further investments and experiments in celebrity promotion.Amazon’s “The Celebrity Store” debuted last year with products endorsed by tennis star Serena Williams, Hollywood heartthrob Zac Efron and more than 30 other notables. That pushed Amazon deeper into the influencer marketing realm dominated by Facebook  Inc.’s Instagram, which is adding its own shopping options. Stars are eager to partner with Amazon. Lady Gaga has an exclusive line of beauty products coming soon. Heidi Klum, who already sells bras on Amazon, has a fashion program a la “Project Runway” in the works that’s scheduled to start streaming on Amazon Video next year.“It’s amazing how much the needle has moved in the other direction,” says Steve Susi, a former Amazon advertising executive and author of Brand Currency. “We were told that Bezos resisted celebrity endorsements because it just seemed so inauthentic and un-Amazonian.”Amazon going mainstream with its marketing techniques is also a sign of maturation. Amazon launched Prime Day in 2015 as a fresh way to lure new Prime members, who pay monthly or yearly fees in exchange for shipping discounts and other perks like video streaming. In subsequent years it kept the event lively by offering steep discounts on its own devices like Echo speakers and the Fire TV. After it acquired Whole Foods in 2017, Amazon made groceries part of its Prime Day promotions to entice members to buy more food.This year there’s no must-have Amazon gadget or new product category to push. So Amazon is emphasizing its exclusive celebrity deals like a three-pack of hairbows from JoJo Siwa for $22.99. The teen entertainer gained a following on the Lifetime reality show “Dance Moms,” which she has converted into a YouTube following used to hawk branded merchandise at Target and other retailers.It’s a new phase of marketing for Amazon as it shifts from winning new Prime members to extracting more money and attention from existing customers by getting them to explore new product categories and sign up for services like music streaming.Amazon says it has more than 100 million Prime members worldwide, but new subscriptions in the U.S., Amazon’s biggest market, are slowing, according to the research firm Consumer Intelligence Research Partners.“They can’t keep adding 10 million new Prime members every quarter because everyone has already made up their minds about that,” says Josh Lowitz, co-founder of Consumer Intelligence. “This is more traditional marketing around a big sales event, which is more celebrity driven.”To contact the author of this story: Spencer Soper in Seattle at ssoper@bloomberg.netTo contact the editor responsible for this story: Robin Ajello at, Andrew PollackFor more articles like this, please visit us at©2019 Bloomberg L.P.

  • Zara's Hot Polka Dot Dress Beats Big Data

    Zara's Hot Polka Dot Dress Beats Big Data

    (Bloomberg Opinion) -- A $69.90 polka dot dress from Zara has become the fashion hit of the summer. Despite little email or social media promotion from the chain, the flowy, universally flattering mid-length frock has become so ubiquitous that someone has created an Instagram account to collect sightings of it out in the fashion wilds – including several that appear to show multiple women wearing it to the same event.The frenzy around the garment epitomizes the ability of the brand’s parent, Inditex SA, to ride a sartorial wave.But the company, founded by Spain’s richest man, Amancio Ortega, is coming under intensified pressure. Rivals in the U.S. and Europe are catching up to its short production lead times. Meanwhile, cheaper upstarts such as Associated British Foods Plc’s Primark and Boohoo Group Plc, are burnishing their fashion credentials.There is no doubt that Inditex’s business model has served it handsomely for more than four decades. But its approach must prove its mettle now more than ever. Otherwise, its advantages risk being gradually whittled away, along with the group’s industry-leading profitability.The retailer, of course, is famous for its fast supply chain. Many competitors order from factories at least six months in advance. But Inditex’s brands, led by Zara, which accounts for about 70% of group sales, produce most of their garments within the current fashion season. About 57% of products are made close to its headquarters in Arteixo, northern Spain, including at facilities in Portugal, Morocco and Turkey. This means Zara clothes can go from design to shop floor within a matter of weeks.Just as important as the tempo is its unique process of developing ideas.It starts with Zara’s army of store managers, who communicate what’s selling and what trends are emerging to the commercial team within Inditex’s sprawling head office. This is not some complex exercise in big data; it’s a conversational approach to absorbing what shoppers want. Designers, who sit nearby, incorporate that feedback into their creations.This has all added up to spectacular growth. But, not only is the company maturing, the competitive landscape has become more difficult. Progress from here will be much harder work.Social media makes it easier for all retailers to see what is hot. Just take those polka dots: Even Topshop, now widely regarded as a bit of a fashion has-been, also managed to produce a stand-out spotty dress. At the same time, retailers from Britain’s Next Plc to Gap Inc. in the U.S. are finally shortening their supply chains. They are still not as speedy as Inditex, but they are narrowing the gap.Another risk is the rise of online shopping. Most stores find that the high cost of fulfilling these sales squeezes profitability. But Inditex’s process is not all that different from what it’s already doing, and that helps shield its margins from the digital onslaught. Store managers telling the head office that they need three puff-sleeve blouses and two pairs of chunky sandals is similar to an individual placing the same order from her laptop. Indeed, Inditex is fond of pointing out that it was a digital company long before the rise of e-commerce.Despite all of its advantages, Inditex’s operating margin has been shrinking for the past six years. Consequently, the group is opening fewer, larger stores, and plans to increase space in prime locations by 5-6% this year. This is the right strategy, but it means that it won't be able to count on large-scale store openings to boost revenue growth. The company is also overhauling its management. Pablo Isla, executive chairman since 2011, will cede his chief executive officer role to Carlos Crespo. By elevating the chief operating officer to the top job, Inditex is clearly trying to wring the maximum benefit from the business model, in order to continue to stay ahead of rivals.At its heart is fashion. We’re at a moment in apparel retailing in which technology is often framed as the lynchpin of any success or turnaround. Investors have been dazzled by newcomers StitchFix Inc. and Revolve Group Inc., which tout their ability to use algorithms to create and buy the right product selection. Executives from the likes of Gap and American Eagle Outfitters Inc. emphasize more personalized digital experiences as a way to win over customers.And while Zara counts on technology, such as by using radio frequency identification to know exactly where every organza halter-neck top and utility boiler suit is, much of its dominance is actually due to something more old-school: it knows how to make clothes that people want – even before they do.Though cost control is always important, what will be crucial for Crespo is ensuring that Zara’s fashion compass stays perfectly calibrated. Putting style at the center of everything the company does is essential, not only to ensure that Zara can continue to charge a premium for the latest looks, but also for ensuring it doesn't emulate rival Hennes & Mauritz AB and end up with a pile of unsold stock.As sales growth has slowed in recent years there have been questions as to whether Inditex has retained its fashion flair, particularly with fewer discernible trends to chase.That polka-dot dress shows that it is still capable of churning out the blockbusters. To stay ahead of increasingly nimble rivals, it must produce a steady stream of equally Instagram-friendly fashion hits.To contact the authors of this story: Andrea Felsted at afelsted@bloomberg.netSarah Halzack at shalzack@bloomberg.netTo contact the editor responsible for this story: Jennifer Ryan at jryan13@bloomberg.netThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Andrea Felsted is a Bloomberg Opinion columnist covering the consumer and retail industries. She previously worked at the Financial Times.Sarah Halzack is a Bloomberg Opinion columnist covering the consumer and retail industries. She was previously a national retail reporter for the Washington Post.For more articles like this, please visit us at©2019 Bloomberg L.P.

  • H&M Gains as Retailer Shows Early Progress Toward Turnaround

    H&M Gains as Retailer Shows Early Progress Toward Turnaround

    (Bloomberg) -- Hennes & Mauritz AB surged after the struggling Swedish clothing retailer showed progress coping with a buildup of unsold garments, raising hopes that the worst may be over after a three-year slump in earnings.Inventory dropped slightly as a proportion of sales, easing to 18.2% at the end of May from a record 18.9% as of last August, H&M said Thursday. Chief Executive Officer Karl-Johan Persson said H&M still aims to boost operating profit this year. The stock rose as much as 11% Thursday in Stockholm.A pickup in revenue growth at the start of the third quarter, helped by a heat wave in Europe, is boosting optimism that the retailer may have returned to a level of sales growth that could gradually put the inventory issue behind it. H&M pledged to reduce discounts for a fourth consecutive quarter as it aims to reduce its 40-billion kronor ($4.5 billion) buildup of unsold garments.Analysts pointed to the June revenue growth of 12% as the trigger for the share gain. The stock can be volatile because short sellers have targeted H&M, betting against almost a fifth of the freely traded shares.Better CompositionThe retailer said that the composition of inventory has improved, implying it will become easier to sell the garments. The family-controlled company has a goal of eventually reducing stock-in-trade to 12% to 14% of sales, a level last seen three years ago. When asked in an interview if that could take four of five years, CEO Persson said it should be less than that, saying he’s “confident” H&M is heading in the right direction.“H&M is improving its offer, which should lead to a sales and earnings recovery in time, albeit with execution risk in an ongoing tough competitive environment,” wrote Richard Chamberlain, an analyst at RBC Europe.The company has recently been offering discounts of up to half off on summer clothes, offering $1.99 camisole tops, $25.99 faux leather biker jackets and skinny jeans for $8.99.H&M also cut this year’s store expansion plan by 26% while pledging more investment in e-commerce. H&M now expects 130 net store openings, further decelerating from a rate that exceeded 400 in recent years. Most of the new H&M shops will be outside of Europe and the U.S. as the retailer seeks faster-growing markets.H&M has been plowing investment into e-commerce, adding online sales in Mexico, Thailand, Indonesia and Egypt this year.The Swedish retailer is trying to catch up after Zara owner Inditex SA made it possible to order clothes from its chains from virtually anywhere in the world. H&M’s e-commerce reach extends to about 48 markets.Inditex has forecast sales growth of 4% to 6% this year on a like-for-like basis as the Spanish retailer outperforms rivals such as Gap Inc.H&M is also trying to catch up with Inditex’s lead in RFID, a technology that allows retailers to track the location of clothes in stores and warehouses to boost efficiency. The Swedish retailer said it now uses RFID in 15 markets. Zara uses it in all its stores.The Swedish retailer said it plans to launch H&M on Indian e-commerce platform Myntra and its & Other Stories chain on China’s Tmall by this autumn.H&M warned that the weak krona is still pushing up buying costs as the retailer buys the bulk of its garments in Asia, where prices are linked to dollars. The krona was on average about 10% weaker against the dollar in the second quarter.Pretax profit dropped 1.3% in the three months through May, missing analysts’ estimates and declining an eighth consecutive quarter.To contact the reporters on this story: Thomas Mulier in Geneva at;Hanna Hoikkala in Stockholm at hhoikkala@bloomberg.netTo contact the editors responsible for this story: Eric Pfanner at, John J. Edwards IIIFor more articles like this, please visit us at©2019 Bloomberg L.P.

  • H&M's Unwanted Jumpsuits Can Bask in a Heatwave

    H&M's Unwanted Jumpsuits Can Bask in a Heatwave

    (Bloomberg Opinion) -- That pile of unsold clothes at Hennes & Mauritz AB just keeps on growing.The retailer said its inventory level reached $4.4 billion on May 31, up from $3.9 billion a year ago.But look past all those unwanted off-the-shoulder dresses and denim cut-offs, and the drop in pre-tax profit, which reflected the strength of the U.S. dollar and investments in stores and online. H&M is finally showing signs of going in the right direction.Firstly, that inventory pile is becoming more manageable. It was 18.3% of sales at the end of the second quarter, compared with 18.6% at the end of the first quarter. In fact, H&M said that the reduced need to discount to offload excess stock should add 1.5 percentage point to its gross margin in the third quarter.Secondly, the changes that H&M is making, such as upgrading its namesake chain to be more like its Arket and & Other Stories outlets, appear to be chiming with customers.The company said it expected local currency sales this month to be 12% higher than a year ago. That sent the shares up about 10%.But there are challenges. Investors are at risk of getting ahead of themselves.It must sustain the recent increase in demand. That may be possible if the current heatwave continues, but it is not guaranteed.Analysts at RBC also point out that sales may be have been flattered by comparisons with the year-earlier period, when the company suffered from disruption as it implemented a new logistics system.The company also faces risks from the foreign exchange environment, given that its current stock was purchased when the U.S. dollar was stronger. H&M is more at risk from the currency escalating than rival Inditex, because it sources more of its products from Asia.And the competitive landscape is not getting any easier. Associated British Foods Plc’s Primark is continuing to expand across Europe and the U.S. and when it does so, it is opening ever more sophisticated stores.H&M’s shares are up 25% so far this year, and trade on a forward price earnings multiple close to that of Inditex.As I have argued, H&M is doing all the right things. Investment in its emerging brands is necessary to expand the top line, while the group is also now giving more attention to its core chain, which is squeezed between Primark at the low end, and Zara at the more premium level.There is also always the possibility of a buyout lurking in the background, given that chairman Stefan Persson and his family own about half of the shares.Sales growth must be sustained, and inventory shrunk substantially to demonstrate that H&M is finally out of the fashion wilderness.To contact the author of this story: Andrea Felsted at afelsted@bloomberg.netTo contact the editor responsible for this story: Jennifer Ryan at jryan13@bloomberg.netThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Andrea Felsted is a Bloomberg Opinion columnist covering the consumer and retail industries. She previously worked at the Financial Times.For more articles like this, please visit us at©2019 Bloomberg L.P.

  • Department Stores Are Dead? Nobody Told Primark

    Department Stores Are Dead? Nobody Told Primark

    Turns out, it was just in the changing room. The new store is an upgrade on the old awkwardly shaped unit Primark had occupied in the city since 2002. Greggs Plc and the U.K. arms of the German no-frills grocers, Aldi and Lidl, are flourishing.

  • Reuters

    H&M limits free deliveries for low-spending loyalty club members

    Fashion retailer H&M has reintroduced delivery fees for its core brand's loyalty club members on small online orders to cut logistics costs and help restore group profitability. The world's second-biggest clothing retailer, whose core H&M chain accounts for the bulk of group sales, is investing heavily in adapting to rapidly changing consumer habits after seeing profits fall and inventories pile up in recent years. A new version of the customer loyalty scheme separates members into a "base" tier or a "plus" tier depending on how many points they earned in the past year, according to Samuel Holst, head of the fast-growing H&M Club.

  • H&M shares fly off the shelves as turnaround strategy shows promise

    H&M shares fly off the shelves as turnaround strategy shows promise

    Fashion retailer H&M reported a much smaller than expected fall in quarterly profit on Friday as it sold more products at full price and margins held up, in a first sign that its turnaround strategy is producing results. Shares in H&M, the world's biggest clothing retailer after Zara-owner Inditex, surged as much as 15.8 percent as the Swedish group said it expected sales at discounted prices to continue to fall in the current quarter. H&M has trailed Inditex in performance and seen its profits shrink and stocks pile up in recent years as it failed to react quickly enough to demand swings and a boom in e-commerce.

  • Reuters

    Instagram adds shopping feature for U.S. users

    The move is in line with Facebook's plan to monetize higher-growth units like Instagram, as its centerpiece News Feed product struggles to generate fresh interest. Instagram has partnered with more than 20 brands including Adidas, H&M, Kylie Cosmetics and Michael Kors on the shopping feature, easing into territory more familiar to retail giants like Inc and Walmart Inc. The feature will allow U.S. Instagram users to click on a product featured in a post, see its price, and click again to bring up an order form.

  • The Future of Fashion Is a Rented Dress

    The Future of Fashion Is a Rented Dress

    A chain stuck with a bloated inventory – perhaps because it has been a little too bold in its buying choices – could divert surplus items to a rental operation, where consumers might be more inclined to take a risk with fashion-forward pieces. One in five U.K. clothing consumers admit to this behavior, according to research firm Mintel. After all, they already deal with returns, some cleaning and repairs to resell garments.

  • Reuters

    Zalando back in style as it bids to be Netflix of fashion

    Zalando, Europe's biggest online-only fashion retailer, set itself a target to triple the value of goods sold on its site in the next five to six years as it seeks to become the go-to app for fashion. Zalando shares had plunged 44 percent in the last year after the company cut its outlook twice, blaming slower sales growth on the unusually long, hot summer in Europe, with profits squeezed by rising competition from the likes of and H&M. For 2019, Zalando said it was targeting growth in gross merchandise volume (GMV) - the value of products sold on its site - of 20-25 percent, and an adjusted operating profit of 175 million euros to 225 million euros.


    MarketPulse Europe: Weak Data Take Gloss off Post-Fed Rally -- Home-grown troubles took the shine off Europe’s stock markets Thursday, capping gains across the board after the Federal Reserve signalled a pause to its cycle of interest rate hikes.

  • H&M quarterly sales rise but doubts about turnaround weigh

    H&M quarterly sales rise but doubts about turnaround weigh

    H&M (HMb.ST) reported on Monday sales growth in the three months to November but doubts about the strength of recovery at the world's second-biggest fashion group sent its shares down. H&M's shares fell 5.9 percent by 0855 GMT, with the sector overall weighed down by Monday's profit warning from British online fashion group ASOS (ASOS.L). "It is not completely clear given the softness of the prior year comparative whether or not H&M is experiencing a product-led recovery thanks to new management within the H&M concept," Societe Generale analyst Anne Critchlow said.

  • Reuters

    H&M to close down its struggling Cheap Monday brand

    H&M (HMB.ST), the world's second-biggest fashion retailer, said on Tuesday it would close down its struggling independent brand Cheap Monday. H&M in 2008 bought Fabric Scandinavien AB, the owner of the Cheap Monday brand, whose trademark product is low-priced skinny jeans, and the store chains Weekday and Monki. Cheap Monday products are sold mainly through around 3,000 resellers world-wide.