H&M is trying to appeal to more aspirational shoppers as it tries to build back profit margins and move away from direct competition with fast-fashion giant SHEIN. The rapid growth of the China-founded online retailer is upturning the industry.
With an estimated 18 per cent market share, SHEIN—which intends to go public next year—is currently the largest fast-fashion retailer in the world, ahead of Inditex, the company that owns Zara, with 17 per cent, and H&M, which has 5 per cent.
Furthermore, SHEIN poses a danger to those companies in their home market: data.ai indicates that the app’s user base is more European than American, and since January 2022, it has more than doubled to 65.5 million monthly active users in the region.
SHEIN is without a doubt a disruptor. Adil Shah, portfolio manager at Storebrand in Oslo, which owns shares of H&M, stated, “I’m sure H&M has been surprised by their rapid growth since they entered the market.”
Offering consumers “the best combination of fashion, quality, and sustainability, at the best price” is still H&M’s stated goal, the company said.
Sales at the company decreased by 4 per cent in the fourth quarter, allowing Zara to overtake it. In the most recent quarter, sales at Inditex, the parent company of Zara, increased by 7 per cent.
Given that its clientele is generally more price-sensitive than Zara’s, H&M raised their pricing later than Zara when inflation drove costs up last year.
However, it was able to enhance its operating margin this year from 3.9 per cent during the same period last year to 5.9 per cent for the first nine months of its financial year thanks to price rises and decreased discounting.
