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Sell H&M and Zara owner Inditex, Deutsche Bank says

By Steve Goldstein

It's time to sell leading European retailers H&M and Inditex, Deutsche Bank advised as it initiated coverage on the European apparel sector.

H&M was rated sell with a 150 kronor price target, as analysts led by Adam Cochrane said the ongoing shift online will further pressure margins. "H&M has progressed in diversifying its business through the creation of new formats and investments in other business but these are unlikely to be enough to offset potential declines in the core H&M brand," they said.

Inditex was rated sell with a EUR22 target, despite being called "arguably [the] most successful clothing retailer in the world." The Deutsche Bank analysts worry margins are likely to have peaked as customer acquisition costs will increase, since fewer new customers will visit their well invested flagship stores, which will force digital marketing costs to be ramped up.

The bank said the consumer spend shift toward leisure will continue, with buy ratings on Adidas , Zalando , Next and Boohoo .

The sector more or less traded in line with the new Deutsche Bank ratings, with H&M and Inditex both lower, and buy-rated Marks & Spencer climbing 4%.

The broader Stoxx Europe 600 was steady at 471.96, as the Jackson Hole Fed conference loomed over the market.

Of the major regional indexes, the German DAX declined 0.2% while the French CAC 40 increased 0.2% and the U.K. FTSE 100 increased 0.2%.

-Steve Goldstein

 

(END) Dow Jones Newswires

08-25-21 0850ET

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