Business
H&M Faces Threat from Fast-Fashion Retailer Shein's Rapid Growth
H&M faces competition from fast-fashion retailer Shein as it aims to appeal to aspirational shoppers, following a star-studded event at a Paris nightclub featuring pop icon Cher and others in H&M's latest collaboration. Shein now holds the largest market share in fast fashion, threatening H&M's core region. H&M's sales declined, while Zara's parent company Inditex saw growth.
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Originally published by www.nationnews.com (opens in new tab)
LONDON – During Paris Fashion Week, pop icon Cher, Swedish singer Robyn and South Korean DJ Peggy Gou performed at Silencio nightclub to a crowd of actors and models including Jared Leto, Elle Fanning and Irina Shayk.
All were wearing shimmering outfits from H&M’s (HMb.ST) latest collaboration, a collection with the brand of late fashion designer Paco Rabanne, who pioneered the use of metal chainmail and sequins in fashion in the 1960s.
The star-studded event hosted by the Swedish fashion retailer is an example of its pitch to more aspirational shoppers as it tries to build back profit margins and move away from direct competition with fast-fashion giant Shein.
The rapid growth of the China-founded online retailer, which sells $8 dresses, $5 t-shirts and $2 jewellery, is upturning the industry.
According to Coresight Research, Shein, which plans an IPO next year, is now the world’s biggest fast-fashion retailer with an estimated 18 per cent market share, followed by Zara owner Inditex (ITX.MC) with 17 per cent and H&M with five per cent.
What’s more, Shein is threatening those players in their core region: its app has more European than US users, according to data.ai, and has more than doubled its number of monthly active users in the region to 65.5 million since January 2022.
“There’s no doubt that Shein is a disruptor. They have come into the market and grown very fast, which I’m sure has surprised H&M,” said Adil Shah, portfolio manager at Storebrand in Oslo, which holds H&M shares.
H&M said on Friday its strategy to offer customers “the best combination of fashion, quality and sustainability, at the best price” remains unchanged.
The company’s sales fell four per cent in its fourth quarter, losing ground to Zara, whose parent company Inditex saw sales growth of seven per cent for its most recent quarter.
When inflation drove costs up last year, H&M was slower to raise its prices than Zara as its customer base is, on average, more price-sensitive.
But this year, price increases and reduced discounting helped it raise its operating margin to 5.9 per cent for the first nine months of its financial year from 3.9 per cent over the same period last year.
Alistair Wittet, portfolio manager at Comgest in Paris, said H&M, Gap, and other traditional high-street brands are all losing market share to Shein, but that Zara is less directly threatened as its customer is more white-collar.
