Sun shines on ASOS as Inditex and H&M feel the chill

Wed Jun 12, 2013 6:29am EDT
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By Sarah Morris and Anna Ringstrom

MADRID/STOCKHOLM (Reuters) - Cold weather in recession-weary Europe left spring collections on the racks of the world's biggest clothing retailers, Inditex and H&M, while small British rival ASOS beat the seasons with soaring demand for its cost-conscious online offering.

Spain's Inditex (ITX.MC: Quote), which owns the Zara chain, posted its weakest quarterly growth in net profit in four years, and an unusually cold spring and early summer did little for sales of sleeveless minidresses and denim skater skirts going into the second quarter. Its shares slipped 1 percent.

The group, whose brands include teen label Bershka and upmarket player Massimo Dutti, posted a 2 percent rise in first-quarter net profit on sales up 5.2 percent. Societe Generale analyst Anne Critchlow said this was equivalent to flat like-for-like sales, stripping out new stores.

Global leader Inditex has outpaced rivals in recent years, but investors were poised for signs that sales growth is slowing after aggressive expansion into markets like China and Russia to sharply reduce exposure to its struggling home market Spain, where unemployment, especially among the young, has hit retailers.

"The question for the incremental buyer is whether Inditex can enjoy another year of good execution on top of the exceptional 2012, and we don't see current trading as much comfort," said Christodoulos Chaviaras at Barclays Capital.

With 80 percent of sales from Europe, Sweden's H&M (HMb.ST: Quote), due to publish full quarterly results on June 19, has been hit harder by the region's economic downturn than Inditex.

The group posted unchanged May same-store and fiscal second quarter net sales on Wednesday, just missing analysts' expectations. H&M has seen margins fall due to currency swings and long-term investments.

Shares in H&M were down 0.5 percent.   Continued...

A worker cleans the windows of a branch store of H&M, Hennes & Mauritz, HMb.ST, the world's second-biggest fashion retailer in Sweden's capital Stockholm May 2, 2013. REUTERS/Arnd Wiegmann