H&M has slashed prices on some of its clothing to less than $2 to compete with Shein, the Chinese discount e-retail upstart that boomed during the pandemic.
The Sweden-based fashion retailer is selling its ribbed crop tops for $1.70 — a 70% markdown form its usual $4.99 price tag.
Shein, whose bargain-basement items are in higher demand during times of soaring inflation, has gained popularity among US shoppers, raising its valuation to $66 billion, according to The Wall Street Journal.
The company, which has drawn scrutiny over its allegedly unethical business and labor practices, recently raised $2 billion in its most recent fundraising round.
A year ago, Shein, which generated some $23 billion in 2022, was said to be worth $100 billion, more than the market capitalization of H&M and Zara combined.
Meanwhile, H&M has been in cost-cutting mode in recent years, closing a total of 303 stores across its brands in the year through May 31.
On Thursday, the company reported second-quarter profits that beat estimates, sending shares soaring by more than 18%. They inched 1% on Friday to close at $3.39.
H&M increased sales in many markets despite a squeeze on consumers’ spending ability and “unfavorable” weather, CEO Helena Helmersson said, adding that its summer collection had got off to a good start as temperatures rose across northern Europe.
Sales from June 1-27 were up 10% from a year earlier, a good sign for the start of H&M’s third quarter.
The H&M womenswear collection, as well as strong performance from the Cos and Arket brands, drove the boost in sales, Helmersson said.
The stronger-than-expected profit helped investors digest a weaker margin of 8.2% for the second quarter, down from 9.2% a year earlier.
H&M aims for an operating margin of 10% by 2024.
H&M faces stiff competition from Shein as well as from another controversial fast fashion Chinese-based retailer, Temu.
According to recent data, Temu overtook Shein in US-based spending in May, Bloomberg News reported.
Temu’s app was the most downloaded and engaged on Apple devices during most days this year, according to Bloomberg News.
A Congressional report published last week offered a blistering critique of Temu, which was accused by lawmakers of failing to maintain “even the façade of a meaningful compliance program” that seeks to prevent goods made by forced labor from being sold on its platform.
In the report, the House Select Committee on the Chinese Communist Party said Temu’s business model essentially allows the company to avoid responsibility in complying with a US law that block imports from China’s Xinjiang region unless businesses can prove the items were made without forced labor.
China has been accused of systemic and widespread abuse of ethnic and religious minorities in Xinjiang, particularly its predominant Muslim Uyghur population. Beijing denies the allegations.
With Post Wires