Fashion in flux, as H&M and LVMH earnings show

Titans of the fashion industry delivered mixed 2022 results last week, with H&M’s net profit tumbling 67 percent, in stark contrast to LVMH’s revenue of 79.2 billion euros, where growth was robust at 23 percent.

2022 has been a year of enlightenment, where the luxury players seem to be better able to absorb inflation and rising costs than those paying bottom line prices. When your base line is cheap overseas production, cheap labour and cheap fabrics, there is little room for manoeuvring when costs increase or markets like Russia are paused. H&M chief executive Helena Helmersson stated Russia was key to its profitability, and the loss “has had a significant negative impact on our results.”

H&M, instead of its usual spree of opening stores, is looking to offload them in 2023. Zara parent Inditex has similarly closed underperforming stores in 2022, yet the group seems to be in a better position than H&M to weather economic storms, posting strong Q4 sales, as its products have a more elevated appeal.

The luxury market has shown great resilience in 20222, with Bain & Company forecasting the current 200 million luxury customers are set to grow to 500 million by the end of the decade.

H&M stock tumbled over 7 percent on Friday, also partly due to it not passing on all price increases to the consumer. While luxury brands have significantly increased handbag and product prices over the past two years, fast fashion businesses have been less inclined to do so.

If shoppers would pay more for the same quality of goods remains to be seen.