Breaking News
Get Actionable Insights with InvestingPro+: Start 7 Day FREE Trial Register here
Investing Pro 0
Ad-Free Version. Upgrade your experience. Save up to 40% More details

StockBeat: H&M, Inditex Hit Speedbumps on the Road to Recovery

Stock MarketsDec 15, 2020 05:33AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
© Reuters.

By Geoffrey Smith -- Europe’s two biggest fast fashion groups confirmed an inevitable slowdown in their business on Tuesday as the winter wave of Covid-19 pandemic put the chills on store sales across much of the northern hemisphere.

However, both H & M Hennes & Mauritz  (ST:HMb) and Zara owner Inditex (MC:ITX) cast the development as essentially a mild disappointment on the road to a lasting recovery next year, with Inditex reiterating a dividend policy that includes the payment of a bonus dividend over the next two fiscal years.

Both had all-but managed to restore sales to pre-pandemic levels by the end of summer, but indicated they had faltered again in recent weeks, even though their online channels continued to flourish.

Hennes & Mauritz said that its sales slowed markedly toward the end of a fiscal fourth quarter that ran through November 30. In the first half of the quarter, sales had been down only 3% from year-earlier levels, but between October 27 and November 30, they were down 22% “as the recovery transitioned into a new slowdown,” the Swedish company said.

For Inditex, sales had returned to -6% year-on-year in October from a low point of -72% in April, but fresh lockdown measures across Europe and the U.S. meant that sales were 19% below 2019 levels in November and 13% below in the first 10 days of December. Things are likely to get worse from there, with Germany closing non-essential stores, London moving into ‘tier 3’ lockdown measures and Mayor Bill De Blasio warning New Yorkers on Monday to prepare for a full lockdown in the crucial period running up to Christmas.

The stocks of the two companies were reasonably relaxed. H&M stock fell 3.4% but are still up 24% since late October, when the rotation back into cyclical stocks began to crank up. Inditex stock fell 2.3% but is likewise up 26% since late October. The STOXX 600 eked out a 0.1% gain but remains essentially rangebound as the market waits for a resolution to the EU-U.K. trade talks.

Neither stock is cheap, with Inditex trading at 45 times trailing earnings and H&M at over 100 times, although that multiple is burdened by exceptional costs from a restructuring that the Swedish company has now largely completed.

However, both can make passable claims that they have used the pandemic to accelerate a structural shift that was necessary for both – away from expensive brick-and-mortar stores and on to the Internet. Inditex’s online sales were up 76% in year-on-year terms in the nine months through October and have sustained that pace of growth since, the company said.

In the case of Inditex, which put out the more detailed figures, pivoting to a more virtual model has gone hand in hand with a big increase in operational efficiency: it has managed to make do with 8% less working capital this year, and with 11% less inventory.

The next few weeks may still be rough on both, but unless the lockdowns continue long enough to affect the sales of spring catalogues, they are unlikely to be more than a couple of speedbumps on a road that becoming straighter and wider.

StockBeat: H&M, Inditex Hit Speedbumps on the Road to Recovery

Related Articles

Russian rouble returns to gains as tax payments loom
Russian rouble returns to gains as tax payments loom By Reuters - May 19, 2022

(Reuters) - The Russian rouble firmed past 63 against the dollar on Thursday, propped up by capital controls as well as looming tax payments that usually require extra conversion...

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at’s discretion.

Write your thoughts here
Are you sure you want to delete this chart?
Post also to:
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Are you sure you want to delete this chart?
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
Sign up with Email