Executive Summary

Zara and H&M are often spoken of in the same breath—as the fast-fashion invaders that are stealing market share away from mass-market rivals in a number of countries. Yet, despite the similarities, we see some key distinctions between H&M and Zara’s parent company Inditex.

• H&M is largely not a fast-fashion retailer: according to a number of reports, H&M produces just 20% of its clothing ranges in-season, in contrast to 60% at Inditex. Similarly, only 32% of factories that H&M uses are located in or close to Europe, compared to 59% of Inditex’s factories.
• H&M’s revenue growth is being supported entirely by new store openings, and its sales-per-store growth is negative. Inditex continues to report positive comparable sales growth and sales-per-store growth.
• We see these distinctions as related. H&M’s product offering is strongly focused on basic apparel items, and this provides it with less differentiation.
• In the context of heightened fast-fashion competition, including from ultrafast-fashion retailers such as Boohoo.com and Missguided, we think H&M will continue to find it tough to maintain underlying sales growth.