H&M narrows gap with Zara on the back of new stores, low prices

Source: ETRetail.com, Oct 07, 2019

MUMBAI: Swedish retailer Hennes & Mauritz (H&M) has narrowed the gap with global rival Zara in India’s fast-fashion market with more new stores as well as merchandise priced lower than most rivals.

The Indian unit of the world’s second biggest clothing chain posted sales of Rs 1,237.7 crore last fiscal, compared to Rs 893 crore a year ago, according to financials sourced from Veratech Intelligence.

Net profit jumped 29% to Rs 45 crore. The brand had opened its first India store in October 2015, competing mainly with Spanish chain Zara, which entered India five years earlier in 2010. Inditex Trent, which runs Zara stores in India, saw its revenue rise 17% to Rs 1,438 crore in 2018-19 with net profit of Rs 71 crore.

Unlike Zara, which has 22 outlets in India, H&M has been more aggressive in store expansion, averaging nearly a store every month since its entry and taking the tally to 41 outlets by March end.

“We are very open to invest more in India. It is about how do you build a stronger business,” H&M global managing director Fredrik Olsson told ET in August. “If policies or setups could be a little bit easier, more of the investments could go directly into improvements for customers and that will grow the business faster.”

H&M and Zara set the benchmark in terms of growth in a market where several brands, including Levi Strauss, Benetton and Marks & Spencer have seen a tepid performance for many years. Each H&M store generated annual sales of Rs 30 crore on average, making H&M’s performance among the best in the apparel segment in the retail market. Zara, however, has larger stores and slightly premium pricing, helping rake in Rs 61 crore per store on an average.

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