A bittersweet feeling. The giants of the textile trade, such as Inditex, H&M and Primark, are presenting their results this year and in these photographs of the progress of their businesses, not everything is shining. In some cases, because sales in Asia – especially in China – are not doing as well as in the past or because of the impact of the exchange rates of the currencies of that continent. In others, because revenues in Europe are suffering from a summer in which rains, sometimes torrential, have left part of the summer collections unsold.
In the case of Inditex, it is affected by the economic storms in Asia. The company controlled by Amancio Ortega detailed this Wednesday in the presentation of its results that Spain and Europe contributed more to its activity during the first half of the year, in which global sales increased by more than 7%. However, in the Asian market, it took the opposite path. This concentrated 16.6% of its revenues during the first half of the year, while a year ago they were 18.4%. In other words, in one year, the Galician multinational has reduced its revenues in this market by more than 3%, which represents almost 3 billion euros.
The company that owns Zara, Massimo Dutti or Bershka, explained during the presentation to analysts that the problem lies mainly in the exchange rates, because if we exclude the effect of currencies, sales in Asia have not changed, that is, they have not changed. They are falling but they are not growing either. “Sales in Asia, in constant terms, are stable. “We are satisfied,” acknowledged the head of the Capital Markets area, Marcos López, during the conference with investors.
“China is one of our main markets,” also acknowledged Inditex CEO Oscar Garcia Maceiras. “They receive our proposals,” the collections, and he stressed that the group is in that country in a “process of optimizing physical stores, for example in Shanghai and improving the online proposal.” “We are seeing a positive evolution,” he summarized.
The dark clouds affecting Inditex’s Asian operations are not an isolated case. Several multinationals, especially in the luxury sector, such as Louis Vuitton, Burberry or Gucci, are experiencing a drop in revenues in the major markets of this continent, especially in China, freed from Japan, where sales are increasing.
Zara owner doing well in Spain
Inditex also gave details on its situation in Spain. In its domestic market, its revenues increased by 9.4% in the first half of the year, above the multinational’s average of 7.2%. Spain contributed 14.7% to its revenues – some 2,644 million – in the six months ended July 31 and its contribution to the group’s turnover increased compared to last year, when it was 14.4%.
García Maceiras stressed during the presentation to investors that this market is doing well. He pointed out that it was the region where the business grew the most in 2023 and that, since 2019, sales growth in Spain has been around 20%, while the number of stores has decreased by 27% since the year before the pandemic. Then, the Arteixo company launched a plan to close small establishments and concentrate its activities in larger stores, with more sales space.
The impact of the summer rains, especially in early summer, has hit both the Irish low-cost clothing giant Primark and the Swedish multinational Hennes & Mauritz (H&M). The former is part of a British business conglomerate, Associated British Foods, which owns companies that have nothing to do with clothing, such as the Spanish Azucarera, and which has just presented the preliminary results for the second half of its financial year ending on September 14.
In this report, the owner of Primark assumes that “it expects sales in comparable stores”, that is, those that have been open for more than a year and which indicate the health of their business, “to decrease by around 0.5% in the second half of the year”, with growth of 0.2% in the third quarter and an expected decline of around 0.9% in the fourth, “it details.
“This is mainly due to the unfavourable weather conditions in the United Kingdom and Ireland”, its main markets. During the second half of the year, these rains resulted in “a lower number of visitors” in their establishments, which “particularly affected sales of our summer collections of women’s clothing and footwear”. However, it also acknowledges having mitigated the impact on its results of inflation, without giving further details. “Although volumes were low in the second half, the average selling price increased”, it acknowledges in its latest presentation to investors. In Spain, on the other hand, it is doing well and has not stumbled, partly because it opened more stores, three in the second half.
Textile companies’ sales often suffer when store collections don’t match expected temperatures or rainfall, because they remain unsold. This happened in recent years, when they began filling their warehouses to avoid stockouts due to problems in the supply chains of garments made in Asia and then had to sell off these stocks as quickly as possible.
H&M has also felt the impact of the rain, as consumers stayed home and clothes failed to sell. The Stockholm-based multinational acknowledged in June that its sales would fall 6% in local currency and that its full-year profit forecast was rising. In fact, that sent its shares down 15% in a single day. It also acknowledged the impact of factors beyond its control. “External elements that influence our costs and sales, including raw materials and currencies, will have a more negative impact than expected in the second half of the year,” it said.
H&M is not alone, as the latest data from Eurostat showed that retail sales in the eurozone fell by 0.3% in July, breaking a multi-month streak of growth. And in France, the employers’ association Alliance du Commerce reported a 0.5% drop in sales in July and 0.3% in August, despite a positive summer season due to the impact of the Paris Olympics.
