Last week, major mass fashion brands like Nike and H&M stumbled amid stiff competition from newer rivals. Don’t forget to subscribe to the Glossy Podcast for interviews with fashion industry leaders and Week in Review episodes, and the Glossy Beauty Podcast for interviews from the beauty industry. –Danny Parisi, sr. fashion reporter
Old vs. new
Two mass fashion giants, H&M and Nike, reported lowered earnings last week thanks to increased competition from newer upstarts. Both companies are titans in their field, Nike in sportswear and H&M in affordable fast fashion. But both are also now challenged by newer entrants into their respective markets.
For H&M, the obvious challenger is Shein, whose low prices and fast direct shipping have undercut retailers and apparel brands selling in that lower price bracket. In earnings reported on Thursday, H&M said that its revenue is likely to fall 6% this year compared to last year. After the news came out, shares fell by 14%, the biggest single-day decline the company has seen in decades.
H&M attributed the revenue drop to a few factors, including poor weather across Europe and its reduction in discounts. The latter, it said, it will reverse for the second half of the year, with slightly higher discounts incoming. Competition in the low-price market from Shein has pushed H&M into a more upmarket space, putting it more directly up against its rival Inditex and its subsidiary Zara.
But Inditex has been performing better than H&M in recent quarters. H&M’s stock price is up 9% over the last 12 months compared to Inditex’s 35%.
Meanwhile, Nike is also facing competition from newer brands. The company saw a surprise drop in revenue this past quarter of nearly 2% after analysts had predicted growth. While its profit margins grew, that was due primarily to layoffs, cost cutting and a reduction in inventory of lower-performing products.
Analysts placed the blame on low demand for Nike products as customers favored more exciting newer brands like On and Hoka, both of which have recently been on hot streaks.
For example, in May, On’s revenue jumped 20% between quarters to a record of $561 million. That’s still a drop in the bucket compared to Nike’s $12.4 billion in quarterly revenue, but it shows that On is slowly gaining market share in the competitive sportswear market.
Hoka also had a record quarter. In May, its parent company, Deckers Outdoor, saw its revenue grow by 21% to nearly $1 billion, thanks in large part to Hoka’s growth.
Nike and H&M won’t be the last major mass fashion brands to be challenged by new upstarts. It will be interesting to see whether they make changes to their business models to compete with their rivals. For its part, Amazon is reportedly launching a low-price Shein competitor.
