Even Zara Is Enveloped by Cloud Over Europe’s Fashion Retailers

by MR Magazine Staff

You know things are bad in Europe’s fashion industry when even Inditex SA is having a tough time. Shares in the Zara owner have fallen 4.5 percent in 2017, putting them on course for their worst year since 2008. While the drop is far less than for peers including Hennes & Mauritz AB (down 22 percent) and Esprit Holdings Ltd. (down 35 percent), it illustrates that even the best in the business are not immune to the challenges of ever-increasing online and discount competition. “Even for them, they are seeing margins under some pressure, predominantly because the competitive landscape is so tough,” said Mark Phelps, chief investment officer of global concentrated equities at AllianceBernstein in London. Third-quarter results due on Dec. 13 are likely to prove the point. Like-for-like sales are set to show a “marked deceleration” in the second part of the period, according to Raymond James analysts, as mild European weather delayed purchases of fall/winter garments. Yet they maintain that Inditex has a business model that’s “unmatched in the industry.” Renowned for revolutionizing the supply chain model for fashion retail, the Arteixo, Spain-based company has gained a devoted following in the investment community. Raymond James is among 22 brokerages with a buy, outperform or equivalent recommendation on the stock; only four say sell. Read more at Bloomberg.