Fashion retailers resilient despite consumer fear

A strong start to June for Sweden’s H&M and the return to profitability at online fashion retailer ASOS helped to allay concerns around a sector hit recently by weakening demand in the US. Signs of resilience came as a relief to investors concerned that economic...

A strong start to June for Sweden’s H&M and the return to profitability at online fashion retailer ASOS helped to allay concerns around a sector hit recently by weakening demand in the US. Signs of resilience came as a relief to investors concerned that economic uncertainty is driving shoppers in key markets like Europe, the US, and China to spend less on clothes. Shares in H&M gained 6% as analysts forecast a stronger third quarter after flat sales from March to May.

H&M, which has lagged Zara owner Inditex, has sought to increase its fashion appeal and further develop its higher- priced brand Cos, targeting shoppers that are less vulnerable to a higher cost of living, as fast-fashion giant Shein takes market share with cheap clothes. Bank of America analysts said H&M’s sold-out collaboration with luxury brand Mugler could also help boost half-year earnings.

ASOS, which is trying to recover from a sharp increase in inventory and debt, is also highly dependent on young shoppers who want the latest trends at low prices. Despite sales falling, it said its focus on profit per order was paying off.

Highlighting the divergent fortunes of different brands in this uncertain environment, premium fashion retailer Hugo Boss said it continues to see strong growth in the US even as retail and luxury peers flagged weakness among “aspirational” shoppers there.

“While cracks are clearly visible in the US consumer environment and to a lesser extent in Europe, Hugo Boss has been immune so far,” Citi analysts said.