Fast fashion fades as H&M, Zara struggle

— Fast fashion is getting tougher.

Zara owner Inditex SA said on Wednesday that profitability shrank to an eight-year low. Main rival Hennes & Mauritz AB reported the first monthly sales drop in almost four years. Shares of both retailers sank.

The reports illustrate the difficulties facing the fashion industry as consumers divert spending to leisure activities and buy more of their apparel from a rising number of online suppliers. The increased competition is putting pressure on prices, while higher production costs are also squeezing profitability.

“In February, industry data was very challenging,” Richard Chamberlain, an analyst at RBC Capital, said in a note. Sales declines of nine per cent in Germany and six per cent in Sweden reflect “some spend rotation into other consumer categories.”

H&M shares fell 5.1 per cent in Stockholm, the most in three months. A one per cent drop in February sales was caused by the month having one day fewer than in the leap year of 2016. Adjusting for that, revenue rose three per cent in local currencies, missing estimates.

Inditex’s gross margin narrowed to 57 per cent from 57.8 per cent in the 12 months through January, missing the Spanish retailer’s goal to keep the measure within 0.5 percentage points of the previous year.