It is not being a simple year for fashion companies. The majority of large companies in the sector accumulate a negative balance in what they have been in 2025, weighed so much by «old» challenges –The 'low cost' signature thrust like Shein, among others – as by new, especially from the tariff point of view.
However, that does not mean that the panorama paints the same for all of them. This is the case of Inditex and H&Mtwo giants of the 'retail' sector whose fall exceeds 10% so far this year, but whose short and medium term future differs greatly. At least so Berenberg believes, that He has started the coverage of both values with a very different advice and assessment for both.
Inditex is still the king
In the case of the Spanish firm, Berenberg is clear: You have to 'buy' your actions. The German bank gives a first objective price of 52 euros to your shareswhich draws a Alcista potential greater than 20% From the last closing prices to a company whose strengths are still intact. While the sales growth prospects are weaker for this year (6-8% at constant exchange rates) after four years postpandymia exceptionally strong «, this» normality «has little normal. For Inditex, Berenberg points out, it is normal for comparable sales ('Like-for-Like') to grow at a rate of between 4% and 6%, which should be «enough» to compensate for the inflation of fixed costs and to allow the Arteixo company to continue gaining market share and surpassing its main competitors. These experts identify that there are A dozen factors that explain the «exceptional» performance of Inditex after the Covid-19 pandemic. Of these, six could continue promoting sales in the future, such as the expansion of the assortment of products – specially from Zara – or the more inclusive clothing sizes. The store optimization program, the growth of the online 'channel, and collaborations with designers and celebrities will also continue to promote sales. On the contrary, the remaining four factors – competitors' stores, increased teleworking, fashion demand from the average market and the reopening of stores after the pandemic – «probably» will not continue to favor the expansion of the business. However, the German firm emphasizes that the Inditex offer, which is mainly directed to the average market with its own prices and customers (with brands such as Zara), differs from industry disruptors, such as Vind or Shein. On the whole, The advantages of your business model «persist»since the short Deitex deadlines for the acquisition of products «remain weird in the fashion industry.» «The business model has the core ability to offer demanded trends within the seasonsupported by a feedback loop towards the designers. This agility has the important advantage for investors to reduce volatility in sales and gross margin, helping to reduce the risk associated with increasingly unpredictable fashion trends, «says Berenberg, this model, adds, explains why one of the most important fashion retailers has one of the lowest risk profiles.» balance is exceptionally stronglike the normalized free cash flow, and the Dividend performance in the 4% environment is attractive Compared to the future performance of Stoxx Europe 600 of 3.3%, despite the inditex cousin in terms of price-benefit (per), «they point out. The current premium of Per De Inditex on the Stoxx Europe 600 for the fiscal year of 2027 is 46%, reflecting that investors are willing to pay a significantly higher price for each euro of benefit generated by the company. This surcharge is lower than the average of 10 years (63%) And the ratio per estimated for that same period is around 20 times, which represents an approximate 14% discount compared to the average of 23 times observed in the last decade.
H&M continues with problems
Less optimistic is Berenberg with H&M. The German firm begins coverage with A resounding advice of 'sale', while places the target price of the shares in 112 Swedish crownsmore than 10% below the last closing prices. According to Berenberg, one of the biggest problems is that the Scandinavian firm remains mainly exposed to value fashion. This is due to the fact that most of the group's sales are brought together by the H&M brand (84% in exercise 2024), which continues to operate in this highly competitive segmentwhich is also the most affected by the disruption of the market due to the competition of second -hand vendors such as Vinned or the fashion 'low cost' of Shein and other Chinese firms. In addition, the thrust of other marks in the average market such as Zara put the Swedish company between the sword and the wall. «These disruptors have caught part of sales growth, and the lack of leverage in sales has caused A EBIT drop over time. We estimate that the H&M market share in the global clothing market is slightly lower (1.2%) with respect to 1.3% of 10 years ago, «says Berenberg. In this sense, H&M You are taking measures to differentiate its offer and expand to the middle market and premium segmentsbut this is a «gradual» process. «Change the business model, which depends on large volumes bought in advance from Asia (for example, from Bangladés) to create economies of scale, it will not be easy. The inventory is decentralized, sent directly from manufacturers to the store stores. This model raises the risk of inventory not sold and greater discounts, which in turn increases the volatility of the gross margin, «says Berenberg. Therefore, the German firm projects for the second semester of 2025 that the favorable exchange rates and lower costs of inputs could be partially compensated by a negative impact of -100 basic points on the gross margin due to greater discounts. H&M provisioning towards closer and expensive suppliers would require higher prices and get away from its value fashion position, which could alienate its current customer base. Sales growth and EBIT margin higher than 10% in the long termbut this ambition is not reflected in Berenberg's estimates or those of the consensus. «The market is still highly competitive in prices, there is little physical expansion in H&M and the online 'channel is not disruptive for the company,» these experts point out. Consequently, Berenberg estimates a single -digit growth of income (similar to the average of 1% comparable sales observed in the last 20 years) and the margins. «Although the company no longer prioritizes the growth at the expense of the margin, we believe that a greater operational leverage in sales would be necessary to achieve the objective of 10%, «he highlights. Our Net income forecast by 2025 is 2% below the consensus and, by 2026, 6% below. «In our opinion, the future of 17 times, with a 27% premium against the European market, seems elevated given the challenging conditions, the high risk of fashion due to the supply model and the operational leverage of 8 times (compared to 3x in Inditex)»
