- H&M and Zara are two of the top names in fast fashion.
- Zara's parent company, Inditex, reported a 7% increase in profits in 2017 and saw continued sales growth in its most recent quarter.
- H&M, on the other hand, has struggled in recent months, with operating profit dropping 62% in the first quarter of 2018. Sales growth was flat for a second straight quarter, it reported on Friday.
- Despite the striking difference in how each company is performing, we found on a recent visit to both stores that H&M had better deals to offer shoppers and a greater variety in the products being sold.
Zara and H&M are in fierce competition with one another to be the best in fast fashion.
But things aren't looking good for H&M. In the first quarter of 2018, operating profit at H&M decreased 62%, following another massive sales drop in the fourth quarter of 2017. Its sales growth was flat for a second straight quarter, it reported on Friday. Business Insider's Mary Hanbury wrote in April that analysts believe H&M has a brand issue — it's not the cheapest store, and its clothes are not the best quality nor the most fashionable.
It's also facing the fact that it simply has too much clothing in stock. H&M currently has over $4 billion worth of unsold clothing, and it's rolling out some big technological changes to better streamline its supply chain.
Zara, on the other hand, has been successful in part because it has found a way to avoid the inventory issue. Brand strategist Martin Roll wrote in March that Zara limits how much of each product is made, controlling inventory and creating artificial scarcity that drives up sales, in addition to offering more fashionable clothing. At the end of the 2017 fiscal year, profits at Zara parent company Inditex were up 7%. It reported continued sales growth on Wednesday.
To see which store was better to shop at, we visited neighboring Zara and H&M stores in Jersey City, New Jersey. Here's what we found: