Still an awful lot, judging by the latest sales numbers from the world’s
leading mass fashion retailers Inditex – which owns chains including Zara
and Bershka – and Sweden’s H&M.
In local currency terms, the former clocked up net sales of €9.7bn in the
first nine monthsto end-October, 10 per cent higher than a year ago. The
latter managed SKr30.9bn (€3.4bn) in its fourth quarter to end-November,
implying an 8 per cent sales rise for its year overall.
Omens
But less cheery omens lurk behind these numbers. Strip out the effects of
rapid store expansion and H&M’s like-for-like sales were down 1 per cent
in November, compared with a year ago. That means monthly sales on this
basis have been static or lower during the past six months.
Moreover, since the company entered the fourth quarter with relatively high
stocks – inventories at the end of the third quarter were 26 per cent higher
year-on-year – investors may worry that some gross margin has been
sacrificed.
At Inditex, by contrast, like-for-like sales were positive in the third
quarter (perhaps up 1 per cent according to Goldman Sachs). But margins
eased 30 basis points, to 59.6 per cent in the first nine months and third
quarter inventories were also 23 per cent higher at €1.6bn.
That is far from calamitous and unusually warm weather in Europe may have been
a factor. But concerns are rising about consumer spending. Private
consumption is now expected to increase by just 0.4 per cent next year in
the European Union, according to official forecasts - just a third of the
1.2 per cent boost anticipated last spring.
H&M, trading at 22 times forecast 2011 earnings, drew about 85 per cent of
its sales from Europe last year; Inditex, on a multiple of 21, about 77 per
cent. Ratings like these leave no margin for error.
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