Fast Fashion: The Year Ahead
by Joelle Diderich
Posted Monday January 25, 2010
Last Edited Wednesday January 27, 2010
PARIS — Talk about a glass-half-full group.
The challenging economy, high unemployment and tight credit are set to continue weighing on the wallets of lower-income shoppers this year, but that translates to fertile conditions for fast-fashion retailers with a strong emphasis on value.
"Consumer spending will be concentrated at the top and bottom of the hourglass, as high-income consumers recover while low-income consumers remain challenged," according to a recent report issued by Citi Investment Research & Analysis. "Consumers at the bottom of the hourglass continue to be value-oriented, given the economic realities of their daily lives."
That's upbeat news for giants like H&M, Inditex SA and Japan's Fast Retailing Co. Ltd., which have the potential to continue growing, thanks to geographic expansion and increased diversification into areas like online retailing and targeted lines, such as home goods.
Citi analyst Richard Edwards said Inditex has low market share outside Spain and Portugal despite operating under eight banners — including the Massimo Dutti, Bershka and Pull and Bear chains — in 73 countries, giving it greater potential to build revenues than its peers. He predicted that over the next five years, the Spanish group would log 10 to 15 percent space growth yearly and annual revenue growth in the midteens.
Tony Shiret, retail analyst at Credit Suisse, said all fast-fashion players have the potential to grow by addressing where they are weak at present. "What matters is a clear market position and a successful business model based on sensitivity to changes in demand and fashion," he said.
Shiret noted, however, the recession has made some consumers more attentive to the poor quality of lower-priced garments, which dooms them to a short existence. "Maybe that value...