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MarketScreener Homepage  >  Equities  >  Bolsa de Madrid  >  Industria de Diseño Textil, S.A.    ITX   ES0148396007

INDUSTRIA DE DISEÑO TEXTIL, S.A.

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H&M joins battle for U.S. e-shoppers

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08/01/2013 | 04:29am EDT
The company logo is placed at the flagship store of H&M, Hennes & Mauritz, HMb.ST, the world's second-biggest fashion retailer is seen in Stockholm

STOCKHOLM (Reuters) - Budget fashion retailer Hennes & Mauritz launched an e-commerce operation in the United States on Thursday, taking on rivals in the world's biggest online market.

The launch is highly anticipated and follows successive delays. But retail experts say H&M may struggle to make the kind of profits from U.S. e-commerce enjoyed by pricier rivals.

H&M has prospered in the United States without a big online presence and is mindful of the likely impact on profit margins of the high shipping and return costs associated with such a vast country.

However, with more and more shoppers buying clothes from home, the Swedish firm is speeding up its online roll-out to capture a slice of the growing market.

H&M has grown fast in recent years in the U.S., it's second-biggest market, but has twice pulled back from announced dates for the online launch, blaming unexpected complexities in setting up an operation well integrated with its stores.

Meanwhile, its main rival Inditex and others such as online e-store ASOS have expanded in the market, while Amazon is pushing further into apparel after EBay prospered with its fashion offering.

"You don't want to lose out on being the port of call for younger shoppers. So H&M should really get in there," Planet Retail consultant Isabel Cavill said.

Apparel has become one of the fastest-growing online retail segments. H&M has e-stores in eight European countries and says they are now as profitable as its bricks-and-morter shops.

In North America, a quarter of clothing sales will take place on the internet in 2030, up from 7 percent in 2011, Goldman Sachs predicts. Researcher Euromonitor International sees the U.S. online apparel market more than doubling in a decade to $41 billion in 2017.

"Generations of shoppers are growing up for whom the multi-channel is a basic expectation," said Kantar Retail consultant Bryan Roberts.

MIND THE RETURNS

H&M has been struggling to work out a viable logistics model in the country, where many shoppers expect free deliveries.

"H&M is low-price, quite low-margin and makes it work by selling very high volumes. An issue with that is very high costs for shipping and, most significantly, returns. It's a particular problem in the U.S.," Conlumino consultant Neil Saunders said.

Up to half of fashion items sold online are returned. At H&M, a shopper may well buy up to three times as many items than at Zara or ASOS. Analysts place average prices at Zara at least 40 percent above H&M's, with ASOS in between.

H&M would be wise not to charge for shipments in the U.S., consultants have said. One more likely way for H&M to support margins is to focus the website on its pricier garments.

H&M's U.S. online store offers free shipping but charges for returns. All items on offer in stores will be available on the website, said Nils Vinge, head of investor relations at H&M.

There is pent-up demand for H&M online and the launch will make a buzz after the brand became well-known. But for a latecomer to an already crowded market, it may be a challenge to lure enough shoppers already used to other sites.

"H&M will need significant volume. That's absolutely key, and that is going to take time to build. It may take years to get to a good level of profitability, also because of the cost for the infrastructure," Conlumino's Saunders said.

Inditex and ASOS ship all goods straight from home markets Spain and Britain. H&M's model is one with regional hubs, meaning bigger costs when entering some markets, but shorter shipping distances. In the U.S., it has built a hub for the online business, the running of which it has outsourced.

Bank of America Merrill Lynch estimates H&M's online sales make up about 6 percent of group turnover, which last year amounted to 21 billion Swedish crowns ($3.2 billion).

Some consultants said that, for an even wider exposure online, H&M should also sell its clothes through one of the big one-stop online shops, along the lines of a recent deal between British discount retailer Primark and ASOS.

Vinge said the chain was focusing on rolling out its own online stores, but did not rule it out. "We are very very pragmatic. We want to be where our customers are," he said.

(Reporting by Anna Ringstrom; editing by Niklas Pollard and Tom Pfeiffer)

By Anna Ringstrom

Stocks mentioned in the article
ChangeLast1st jan.
AMAZON.COM 1.60% 1785.66 Delayed Quote.17.01%
ASOS PLC 6.53% 3508 Delayed Quote.44.62%
EBAY INC. 1.13% 39.26 Delayed Quote.38.30%
GOLDMAN SACHS GROUP INC. 1.32% 209.25 Delayed Quote.23.63%
HENNES & MAURITZ -1.38% 203.8 Delayed Quote.63.98%
INDUSTRIA DE DISEÑO TEXTIL, S.A. 0.25% 28.52 End-of-day quote.27.29%
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Financials (EUR)
Sales 2020 28 029 M
EBIT 2020 4 953 M
Net income 2020 3 792 M
Finance 2020 8 140 M
Yield 2020 3,66%
P/E ratio 2020 23,4x
P/E ratio 2021 22,1x
EV / Sales2020 2,88x
EV / Sales2021 2,66x
Capitalization 88 826 M
Chart INDUSTRIA DE DISEÑO TEXTIL, S.A.
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Technical analysis trends INDUSTRIA DE DISEÑO TEXTIL
Short TermMid-TermLong Term
TrendsNeutralBullishBullish
Income Statement Evolution
Consensus
Sell
Buy
Mean consensus OUTPERFORM
Number of Analysts 27
Average target price 28,97  €
Last Close Price 28,52  €
Spread / Highest target 22,7%
Spread / Average Target 1,59%
Spread / Lowest Target -29,9%
EPS Revisions
Managers
NameTitle
Carlos Crespo González Chief Executive Officer & Executive Director
Pablo Isla Álvarez de Tejera Executive Chairman
José Ignacio Fernández Chief Financial Officer
Amancio Ortega Gaona Non-Executive Director
Emilio Saracho Rodríguez de Torres Independent Non-Executive Director
Sector and Competitors
1st jan.Capitalization (M$)
INDUSTRIA DE DISEÑO TEXTIL, S.A.27.29%98 706
KERING14.10%65 406
FAST RETAILING CO., LTD.28.47%65 366
ROSS STORES37.18%41 284
HENNES & MAURITZ63.98%35 345
ZALANDO85.07%11 501