Low-priced fashion helps H&M break the gloomy European market

H&M is the world’s second-largest clothing retailer, whose quarterly profit as of June surpassed previous estimates. Consumers plagued by fiscal tightening are eager to make themselves happy by buying cheap fashion.

H&M reports that its gross profit margin is stable, which gives people hope that the long-term drag on high cotton prices will end.

“Many countries are still in a challenging macroeconomic situation, responding to austerity measures and restricting consumption.” H&M said that we have a strong spring-summer sales series, including soft colors and Hawaiian-style holiday wear.

The company continued: “H&M will continue to have market share. Even in challenging markets, this fact is a clear sign that H&M's strong product launch is recognized by consumers worldwide.”

As the disposable income is affected by price increases, slower wage increases and the squeeze of government cuts, many European retailers are still struggling, while confidence is disturbed by the sovereign debt crisis.

Due to its focus on low-cost fashion and a large geographical distribution, including some fast-growing emerging markets, H&M and the Spanish Inditex Group are doing better than most other companies.

H&M CEO Persson said that the Spring-Summer collection includes pleated skirts and overalls-style blouses. In all of its 44 markets, whether in large or small cities, countries with strong economic growth are still in overall The countries in which the economy is in a severe situation have all been snapped up.

Analysts praised H&M's better-than-expected performance in terms of profit margins and operating costs. They will continue to favor the Inditex Group.

H&M said that compared with the pretax profit of 5.8 billion kronor last year, the profit before tax this year will reach 7.1 billion kronor from March to the second quarter of May.

Compared with shifting the pressure of rising costs to consumers, such as cotton prices, the group is more willing to adopt a price-invariant policy. This helped the group to gain market share and maximize profit margins.

However, H&M said that the impact of high cotton prices has almost been offset, and it also announced that 61.7% of gross profit margin remained unchanged, exceeding the 61.1% forecast by **.

"This is obviously affected by the Asian cost-price mitigation, and it appears to be faster than expected. I think the situation will become even better in the next quarter," said Sunny Securities analyst Daniel.

H&M has about 2,500 stores and its main business is in Europe. By cooperating with well-known designers, H&M has already had a track record to regulate sales. In recent years, H&M has expanded its core brands to new chain stores to follow the Inditex Group's approach.

The company is currently expanding in China, the United States, and Russia. It also plans to enter five new markets and remain optimistic about the prospects for continued growth.

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