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Zara faces an H&M attack on upmarket fast fashion, amid drop in profits

June 11, 2014
June 11, 2014

The numbers: Not so hot. Inditex’s profits fell 7.3% to €406 million ($550 million) in the first quarter—the sharpest drop since 2009. Sales grew by 4.3% to €3.75 billion. Still, investors didn’t seem too disappointed and shares rose.

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The takeaway: One third of the company’s sales are generated outside of Europe. This made the euro’s strength especially tough on profits. Stripping out the effects of currency fluctuations, Inditex said sales would have risen 11%.

What’s interesting: Window displays at Zara’s fast-fashion rival Hennes & Mauritz (H&M) shout at passersby with loud prints, bright colors, and youthful styles. But Zara has leaned heavily toward more minimal, upmarket looks. The stance has gained the retailer credibility with fashion insiders in New YorkH&M recently brought its sleeker, more sophisticated label, COS, to the US. It will be interesting to see how this affects Zara’s sales—and whether Inditex counters by bringing Zara’s more-affordable sister brand, Stradivarius, to the states.

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