Inditex beats expectations...and H&M

The FashionUnited Top 100 Indexclosed down Thursday,

hitting the 1,273.59 after losing 0.22. Meanwhile, H&M posted a smaller-than-expected fall in third-quarter pre-tax profit: 4.85 billion Swedish crowns.

Pretax profit at the Swedish firm was 4.85 billion Swedish crowns (S$918 million) in June through August, against the Reuters poll´s forecast for 4.66 billion, and a year-earlier 5.74 billion. In an official communication, H&M said high cotton prices and other input cost inflation as well as negative currency translation effects weighed on earnings. The gross margin shrank to 58.6 per cent from 60.5 per cent, overshooting a forecast for 58.1 per cent.

In contrast, H&M first competitor, Zara´s owner Inditex, has announced that net profit rose 14% in the first half of this year as the retailer continued its rapid international expansion away from its home market. In the first half of the year, the retailer opened stores in Australia and over the next few months Zara will open its first outlets in South Africa, Taiwan, Georgia, Azerbaijan and Peru as well as launch Zara online in Japan on October 20. Sales for the retailer were also given a lift by other online launches. The Spanish textile giant stated that net profit for the six months to the end of July rose to E717m (£623m), ahead of expectations. Sales increased 12% to E6.21bn (£5.4bn) while same-store sales were up 6% on the year.

In Wall Street, Nike's shares closed down 0.5% to $87.99 on Thursday and were inactive after hours. A lack of balance in the merchandise assortments for Q2 caused net sales in Aeropostale to decline by 5%, with comp sales dropping by 14%. The situation was exacerbated by a dismal performance in the crucial back to school season, according to Trefis analysts. With the U.S. economy standing on the brink of yet another recession and the consumer spending expected to decrease, Aeropostale has been forced to look out for options internationally. The move to expand via e-commerce channel makes sense as it requires much lesser investments when compared to retail channel.