H& M got mixed reviews for its latest sales update even though the European fashion retailer beat expectations across all its markets.
Total sales rose by 12% to US$5.4bn in its second quarter in local currencies, though the rise jumped to 17% on a net basis.
The numbers mirrored European rival and Zara owner Inditex, which reported recently footfall had bounced back strongly after the pandemic as it too reported higher sales.
H&M is adapting to improve its high street performance through collaborations such as Atelier100 in Hammersmith, a collaboration with Ikea’s largest franchisee Ingka Group to create a workspace for 'emerging creatives'.
All products in the store are sourced using locally-sourced materials and showcase up-and-coming new designers.
Not all analysts were impressed by H&M’s performance. US broker JP Morgan said: "Whilst the top-line improvement is encouraging, we are mindful that strength in clothing trends over summer could be short-lived as the consumer environment weakens,"
JPM pointed to warnings from Nordic online sports retailer XXL and online clothing group Boozt, both of which cited weakening consumer sentiment.
China is another problem according to Harry Barnick, a senior analyst at research house Third Bridge:
"Net sales grew just 12% in Q2 with the headwinds of rising inflation, covid restrictions in China and the threat of a global recession.
“H&M’s overall growth ambitions will continue to be held back by stagnant growth in Asia. Our experts say it needs to win back the trust of Chinese consumers to capitalise on this high-growth market.”
Barnick added: “Inditex continues to outgrow H&M in 2022. Our experts say that this is a result of Inditex’s online investment, pricing power and fast response to real-time fashion trends.”
“Shein presents a real global threat to H&M despite H&M being more committed to sustainability and quality.”
H&M will make its own comment on current trends when it publishes a full quarterly report. Shares today were down 4%.