International News - Opinion split over H&M reforms

Opinion is divided over advances made by Swedish fashion retailer H&M in closing the competitive gap on international rival Inditex.

H&M has reduced lead times to eight weeks in some cases, so reducing the danger of fashion mistakes.

Analysts at Dresdner Kleinwort Wasserstein praised H&M's efforts in pushing buyers to commit closer to the season. They said the supply chain improvements and reduced lead times have meant cuts in the overall level of mark-downs.

'While we still believe Inditex's model is stronger, the differences between the two are not as significant,' they reported in a note. Recent operational advances are also likely to lead to further margin increases.

Broker JP Morgan agreed and said the H&M business model is now less risky.

A research note from the broker said: 'The fashion risk profile of H&M has, in our view, declined substantially, driven by its more flexible supply chain.'

However, analysts at HSBC cast doubt on the extent and nature of the improvements. The broker said the fast-fashion element of the H&M range has been overblown.

HSBC said: 'We are unconvinced about the extent of reforms in the supply chain and suspect that gross margin improvements owe more to a conservative approach and a weakening dollar than to supply chain reforms.'