Zara expansion, H&M margins under pressure
- Inditex is still pushing Zara outward while H&M is still fixing the engine. That is the real split inside fast fashion right now. - Zara owner Inditex ended FY2025 with record sales, a 58.3% gross margin, and plans to add about 5% more selling space in 2026. - H&M’s latest quarter looked cleaner on profit, but sales fell 1% in local currencies — a sign demand is still fragile.
Fast fashion is telling two very different stories at once. One story is expansion — Zara owner Inditex is still opening, enlarging, and upgrading stores while keeping margins unusually strong. The other is repair work — H&M is improving inventories and profit, but demand still looks soft and currency moves are making the numbers uglier. That gap matters because it shows where the sector’s power sits in 2026: not just with whoever sells cheap clothes, but with whoever can move product fast without wrecking margin. (inditex.com) ### Why does Zara look stronger? Inditex’s latest full-year numbers were blunt. Sales rose 3.2% to €39.9 billion in FY2025, gross profit hit €23.2 billion, gross margin reached 58.3%, and net income climbed to €6.2 billion. The company also said sales in consta(inditex.com)rrent collection is landing. (inditex.com) ### What is the company actually doing? It is still spending into stores and logistics — but in a controlled way. Inditex says annual gross space should grow around 5% in 2026, with more online growth on top, and it plans about €2.3 billion of ordinary capex th(inditex.com)ly, Zara’s model is still physical retail plus fast replenishment, not stores versus online. (inditex.com) ### So where does India fit? India matters less as a one-off headline than as part of the map. Inditex keeps pointing to growth across geographies while maintaining low market share in a fragmented global sector, which is corporate shorthand for “we still have (inditex.com)ive store growth without depending on Europe alone. That makes India look like a long runway, not a quick win. (inditex.com) ### Why is H&M’s story different? H&M’s March 26, 2026 quarter showed progress, but not escape velocity. Net sales were SEK 49.6 billion, down 1% in local currencies, while store count was about 4% lower than a year earlier. Gross margin improved to 50.7% from(inditex.com)rations are not the same thing as strong demand. (hmgroup.com) ### Is this just a currency problem? Not just. H&M said the stronger Swedish krona knocked more than 9 percentage points off reported sales in SEK, so translation clearly hurt. But the underlying issue is softer consumption. Management itself described the quarter as one of cautious consumption, and March sal(hmgroup.com)m. (hmgroup.com) ### What about climate and supply costs? They are real, but they are showing up unevenly. Inditex’s reporting still flags environmental factors as a risk to demand patterns and to the supply and demand of textile raw materials, yet the company says those risks are not currently material to group performance. (hmgroup.com)ry expects climate-linked costs and financing needs to keep rising even when they do not blow up a quarter all at once. (inditex.com) ### Where does Zalando fit in? Mostly as a reminder that online fashion is not automatically the easy-margin alternative. Zalando’s full-year 2025 results were solid, but the mix matters — management highlighted faster growth in partner s(inditex.com)margin revenue streams, not just more orders. (corporate.zalando.com) ### Bottom line? The sector split is getting clearer. Inditex is showing that store expansion still works when product turnover, logistics, and pricing discipline stay tight. H&M is showing that margin repair is possible, but harder when demand is shaky. The big lesson is simple — in 2026(corporate.zalando.com). (inditex.com)
