Market Analysis: Tesco H&M Group And Boohoo

Tesco results - market leadership but a fragile reputation with suppliers; re-lay rules unlikely to show dramatic shift in immediate carrier mix; H&M Group - challenge on multiple fronts and Boohoo -sky high freight rates, squeezed consumers, softening growth- Boohoo will have to find creative ways to reduce costs

Alex Smith, Global Sector Lead for retail research at Third Bridge comments on Tesco:

“Tesco is attempting to be the last of the big UK supermarkets to pass on inflation costs to customers as it looks to gain market share and use its scale to manage costs. It is also expanding the number of lines in its successful Aldi price match campaign.”

“Tesco’s market leadership gives it more bargaining power to negotiate down prices with suppliers. However, its relatively limited product range and fragile reputation means it can’t push negotiations too far.”

“Tesco was a pandemic winner and our experts expect it will continue to grow market share over the next 12 months. Its Clubcard scheme remains a competitive advantage for the Group.”

"With the new display rule, supermarkets will give away premium promotional space to healthy food. However, with high inflation, our experts say that it is unlikely we’ll see a dramatic shift in carrier mix in the months ahead."


Harry Barnick, Senior Analyst at Third Bridge reports on H&M Group and Boohoo.

"Net sales grew just 12% in Q2 with the headwinds of rising inflation, covid restrictions in China and the threat of a global recession".

“In the current inflationary environment, H&M can push up prices in certain ranges. That being said, increasing prices in the core fashion ranges will be a challenge.”

“Inditex continues to outgrow H&M in 2022. Our experts say that this is a result of Inditex’s online investment, pricing power and fast response to real time fashion trends.”

“Shein presents a real global threat to H&M despite H&M being more committed to sustainability and quality. ”

“H&M could claw back market share in the event of further inflation and cost-of-living increase as customers trade down from higher-priced brands such as Zara. Additional market share could be won from smaller and local brands unable to deal with rising costs.”

“H&M’s overall growth ambitions will continue to be held back by stagnant growth in Asia. Our experts say it needs to win back the trust of Chinese consumers to capitalise on this high-growth market.”


“Q1 sales declined 8% year-on-year as Boohoo has struggled to excite the fast fashion customer in a post-covid context.” 
 
“Boohoo’s impressive growth has stalled, dampened by inflation and the rising cost of living as consumers begin to tighten their purse strings.”
 
“The sales challenges are compounded by sky-high freight rates and raw material cost inflation. Boohoo is now faced with the challenge of increasing prices in a promotionally driven and highly competitive market.”
 
“Mid-single-digit margin pressure could be experienced in the short-term as Boohoo learns how to cope with the new operating environment.”
 
“Our experts say Boohoo will have to find creative ways to reduce costs. Improving purchasing costs through fabric consolidation and production locations are key to the success of this cost reduction strategy.”
 
“Shein could take market share from Boohoo in the UK market given its broad offer and attractive price position.” 
 

Third Bridge is a global primary research firm that interviews more than 6,000 internationally recognised industry experts and business leaders a year to compile 360-degree market intelligence for institutional investors. www.thirdbridge.com