a 23 per cent increase in its revenue and profit from recurring operations. In a global environment where many countries are facing high interest rates and inflation, as well as cost of living crisis, what explains the strong performance of a luxury conglomerate, especially when contrasted with the more affordable, multinational clothing company?  Executive director at VMLY&R Global, Jon Bird told Inside Retail that the luxury category has performed well during, and post, the Covid-19 pandemic. He believes this is partly due to ‘revenge’ spending from consumers after lockdowns, as well as the continuing trend toward luxury purchases – with an emphasis on quality over quantity. He said the biggest audience for luxury goods are millennials with Gen Z not far behind. There is also a movement, by the latter in particular, to mix and match vintage finds with luxury.  This, he explained, counts against fast fashion. “In terms of H&M’s result, there were contributing economic and structural issues, such as rising costs and its exit from Russia,” Bird told Inside Retail. “But questions do need to be asked as to whether H&M is now ‘caught in the middle’, between value players such as Shein (which has its own challenges of course), and more ‘premium’ fast fashion retailers such as Zara. H&M is cheap, but not the cheapest, and offers acceptable quality but with a lack of distinctive design. “It’s revealing that H&M’s niche brands like COS and Arket have proved more resilient.” While both groups left the Russian market, H&M attributed this – as well as rising costs – as significant factors in its earnings slump. LVMH appears to have been able to offset these challenges, with strong growth in the US, European and Japanese markets. According to associate apparel analyst at GlobalData Darcey Jupp, H&M was impacted by a tough macroeconomic climate in the European market, and is now lagging far behind key rival Inditex. She said the group has admitted to these inherent troubles, with CEO Helena Helmersson stating that it is working on improving product assortments and customer experience.  “Taking these steps will be vital for H&M to regain competitiveness against Zara, which excels in both areas,” she said. Jupp added that muted sales growth between 1 December and 25 January shows that it might be too little too late for the group.  “Consumers have [begun] reducing apparel spend and have become more selective over the brands they shop with,” Jupp said. “So H&M is likely to have another challenging year. “ Preventing future slides Amid rising costs, Jupp contends that H&M should be cautious of price hikes, as it faces a risk of shoppers trading down to value competitors such as Primark and Pepco. Rather, she said that H&M’s focus should be on championing value for money, and offering a compelling, trend-leading product range. This, she explained, will be vital in preventing a further drop in the group’s margin. “H&M’s intention to focus more on sport, beauty & home is wise, as these areas will be more resilient than clothing & footwear amid the worsening macroeconomic conditions in 2023,” Jupp said. LVMH saw currency adjusted sales growth of 35 per cent, 31 per cent and 15 per cent on the year prior, which – according to GlobalData apparel analyst Louise Deglise-Favre – illustrated that its target audience was not significantly affected by high inflation and mounting living costs. The only dent in the group’s performance was in Asia, which was affected by persistent COVID-19 restrictions in China. But, as international travel and tourism resumed, Deglise-Favre noted that part of that consumer base’ spending would have been captured in other regions. She also said that it had cemented its brand image through exhibitions and collaborations with artists such as Jeff Koons and Yayoi Kusama. “The conglomerate’s other brands also saw great momentum, especially Celine and Loewe, with their respective runway shows under Heidi Slimane and JW Anderson critically acclaimed and generating lots of excitement on social media,” she said. A potential silver lining for H&M is the improvement to its online offer, as well as its online resale platform, Sellpy, which saw sales increase by 85 per cent in FY2021/2022. Jupp said the group should consider expanding the platform into more European countries – with GlobalData forecasting 22.2 per cent growth in this market in 2023. Future challenges While LVMH subsidiary Sephora saw record earnings – partly attributed to its expansion into Kohl’s in the US – Deglise-Favre said the brand’s website wasn’t able to cope with increasing numbers of visitors.  “Sephora must ensure it continues to invest in its website design in order to be able to compete with well-established UK online beauty retailers [which] look more modern and which have more visually appealing listing pages,” she said. Meanwhile, another challenge for H&M’s recovery is the growing backlash against fast fashion. Bird points to a major global research study which demonstrated that Gen Z are increasingly mindful of the relationship between the way they consume, and the environmental impact of that consumption. “While they are currently driven by value, [these customers] also want to live their ‘values,’ and sustainability is a major concern,” he said. “No matter how H&M and others try to address this topic, fashion is a large contributor to waste and pollution, and questions arise over H&M’s factory working conditions.”