Danni Hewson, AJ Bell financial analyst, comments on trading updates from Primark owner, Associated British Foods, H&M and on Gap’s decision to close UK stores:
“The thing about fashion retail is there is no right way to do it, but when it’s right you know it, it resonates. Get it wrong, or worse get it really right but then stop evolving, stop innovating and it quickly loses appeal and customers.
“The last couple of days have brought the state of retail into sharp relief. On the one hand Gap, with its dated denim dreams has pulled up stakes in the UK, ditching stores to focus on its online customers. On the other, Primark’s price-conscious palaces have pulled shoppers back in and despite social distancing measures, sales have topped pre-pandemic levels.
“There’s been lots of discussion about how retail is changing particularly the shift to online but as Primark demonstrates time and time again, online isn’t the only game in town. The difference seems to be love. Primark feels loved by its bosses, by its staff and by its customers. Gap, by comparison, has suffered from a kind of benign neglect. Rooted in its heyday heritage, it does its thing really well but it’s not “now”.
“H&M seems to understand the importance of relevance and how that differs according to geography. Announcing higher than expected second quarter profits the company’s Chief Executive highlights the perils of “sitting back”. Like all retailers the business was knocked down by the pandemic, but it’s used the time to really dig into what it wants to be, who its customer is and how they want to shop.
“For H&M, it’s sustainability that’s really chimed with shoppers and the business has cleverly used it as a marketing tool and to give focus and direction. It’s chosen to continue to straddle two worlds, giving customers the option of trying on their clothes, immersing themselves in the lifestyle the brand is selling but also honing its online capabilities.
“Perceived wisdom suggests that is probably a sweet spot if high streets and shopping centres can continue their evolution and provide consumers with an “experience” worth getting off the sofa to enjoy. But fashion is fickle, habits are hard to break and competition is fierce. Successful fashion retailers could never follow the crowd and that’s as true today as it ever was.”
