Global fashion industry sees mixed results for H1 & Q2 FY24

The fashion and e-commerce companies collectively showed a strong performance for the period ending June 30, 2024, which marks the conclusion of the second quarter (Q2) and the first half (H1) of the fiscal 2024 (FY24), spanning January to December 2024. Out of the seven companies reported, including two fashion e-commerce companies, four delivered strong performance, one saw moderate performance, and two experienced weak performance. The overall results reflect a positive trend in the fashion sector for the period.

Strong: Growth in Both Sales & Profits

Amazon | (NASDAQ: AMZN)

For the second quarter, ended June 30, 2024, the Seattle-headquartered e-commerce behemoth Amazon reported net sales increase of 10 per cent to $148 billion, compared to $134.4 billion in Q2, FY23. The sales increase, excluding the $1.0 billion unfavourable impact of changes in foreign exchange rates, is 11 per cent. Key markets too continued to grow, with sales in North America increasing 9 per cent to $90 billion, and International segment increasing 7 per cent to $31.7 billion (up 10 per cent excluding changes in foreign exchange rates). Sales of AWS segment increased 19 per cent, y-o-y, to $26.3 billion.

From $7.7 billion last year, the operating income increased to $14.7 billion in the reported quarter. Net income of $13.5 billion meant $1.26 per diluted share versus $0.65 per diluted share in the second quarter of 2023. The company’s cash flow increased to $53 billion for the trailing 12 months, compared with $7.9 billion for the trailing 12 months ended June 30, 2023.

The Q3, FY24 guidance now includes net sales of $154 billion to $158.5 billion, expecting a growth between 8 to 11 per cent over Q3, FY23. This guidance anticipates a negative impact of ~90 basis points from foreign exchange rates. Operating income is expected to stay between $11.5 billion and $15.0 billion, compared with $11.2 billion a year ago.

Delta Galil Industries | (TLV: DELT)

Caesarea-based Delta Galil, the global manufacturer and marketer of branded and private label intimate, activewear, loungewear and denim apparel for ladies, men, and children, had another strong quarter highlighted by record second-quarter direct-to-customer sales, growth in the private label sector, and significant expansion in profitability.

For Q2, FY24, sales grew 6 per cent to $471.4 million across all channels versus $443.6 million in same quarter last year. Aggregate half yearly sales increased 4 per cent to $922.2 million from $886 million for the same period in FY23.

Gross margin of 41.9 per cent for the second quarter was up 150 basis points due to a better segment and channel mix and improved profitability of Delta factories as a consequence of higher volume. Gross margin in the first half of 2024 increased by 240-basis points to a first half record of 42.1 per cent against 39.7 per cent in the first half of 2023. Quarter’s EBIT before non-core items increased by 22 per cent to $37.8 million, or 8.0 per cent of sales; net income increased 40 per cent and 27 per cent, excluding non-core items, net of tax, to $21.0 million. Half-yearly net income increased 83 per cent to $33.1 million. The increase in net income produced a diluted EPS, excluding non-core items, net of tax, of $1.22 compared to $0.85 in FY23.

The company reaffirmed its 2024 outlook based on the solid first half performance and strong backlog.

Marimekko | (HEL: MEKKO)

In its half-year financial performance, Finnish company Marimekko reported a continued growth in net sales in the second quarter while operating profit fell slightly; the cumulative operating profit over six-month period, however, improved.

The net sales of the lifestyle design company, renowned for its original prints and colours, increased 8 per cent in the second quarter amounting to €43.7 million ($48.15 million) (€40.3 a year prior), boosted in particular by the growth of wholesale sales in Finland and Scandinavia as well as increased retail sales in Finland (up 5 per cent). International sales grew by 6 per cent as, in addition to Scandinavian wholesale sales, retail sales grew in all market areas. Operating profit dropped slightly to €6.1 ($6.72) million from previous year’s €6.6 million. Comparable operating profit was slightly behind the strong comparison period and totalled to €6.4 million ($7.05 million) (vs €6.8 million) equalling to 14.6 per cent of net sales (vs. 16.8 per cent).

For half-year, company’s net sales grew by 8 per cent amounting to €81.3 million ($89.58 million) (vs €75.6 million); operating profit improved to €11.2 million ($12.34 million) (vs €10.4 million) and comparable operating profit rose to €11.6 million ($12.78 million) (vs €10.6 million) equalling to 14.2 per cent of net sales (vs 14 per cent).

The Marimekko Group's net sales for 2024 are expected to grow from €174.1 million in 2023, and comparable operating profit margin is estimated to be approximately 16–19 per cent against 18.4 per cent in 2023. Licensing income in 2024 is forecast to be approximately at the previous year’s record level.

Zalando SE | (ETR: ZAL)

Zalando SE, a publicly traded German online retailer of shoes, fashion and beauty active across Europe, reported a strong sports growth in its second quarter results with gross merchandise volume (GMV) rising 2.8 per cent to €3.8 billion ($4.22 billion), and revenue increasing 3.4 per cent to €2.6 billion ($2.9 billion). Business-to-consumer (B2C) delivered strong growth in Sports, Designer and Beauty, while business-to-business (B2B) sales grew by 10.3 per cent.

For the company, adjusted EBIT rose to €171.6 million ($190.47 million) during the quarter, in line with market expectations, compared to €144.8 million ($160.73 million) a year earlier. The improvement in profitability was driven by successful inventory management and lower fulfilment costs, with the EBIT margin increasing 0.8 percentage points to 6.5 per cent of revenue.

Berlin-based Zalando SE confirmed its full-year guidance for 2024 and now expects both GMV and revenue to grow 0 to 5 per cent this year compared to 2023. The company continues to focus on profitable growth, with continued margin progression. Adjusted EBIT is expected to be between €380 million (~$422 million) and €450 million (~$500 million).

The fashion e-commerce company has plans to strengthen existing tech sites while adding new complementary site in China’s tech-hub Shenzhen; agreement with OpenAI to continue deep collaboration and build even more generative AI solutions together for the fashion industry.

Moderate: Growth in Either Sales or Profits

Hanesbrands Inc | (NYSE: HBI)

Hanesbrands Inc announced its second quarter financial results for FY24 in the first week of August, marked by net sales from continuing operations decreasing 4 per cent compared to prior year as sales declines expectedly continued to moderate. On an organic constant-currency basis, net sales decrease was at 1 per cent.

Adjusted gross profit, excluding certain costs related to restructuring and other action-related charges, increased 11 per cent over last year to $396 million; and, adjusted gross margin of 39.8 per cent increased approximately 525 basis points. As a per cent of net sales, adjusted SG&A expense of 27.1 per cent increased 100 basis points y-o-y, driven by a 125-basis point increase in brand marketing investments within the US innerwear business. Adjusted Income from continuing operations totalled $53 million or $0.15 per diluted share, compared to $8 million or $0.02 per diluted share in Q2 FY23. Cash flow from operations reduced to $78 million from $88 million last year, and free cash flow decreased to $71 million from $78 million.

The company is on-track to complete the sale of the global Champion business in H2 2024 and continues to expect net proceeds of approximately $900 million, including working capital adjustments and customary transaction costs and excluding an additional contingent cash consideration of up to $300 million.

For the fiscal 2024, ending on December 28, 2024, the Winston-Salem, NC-based company expects net sales from continuing operations to be approximately $3.59 billion to $3.63 billion, representing ~4 per cent decrease as compared to prior year on a reported basis and ~2 per cent decrease on an organic constant currency basis. Adjusted EPS from continuing operations is expected to be in the range of approximately $0.31 to $0.37, and cash flow from operations being approximately $200 million.

Weak: No Growth in Sales & Profits

Aeffe Spa | (BIT: AEF)

The global slowdown in fashion and luxury consumption, especially in key markets of Italy and the US, affected the performance of San Giovanni, Marignano-headquartered Aeffe, which continued to invest in the repositioning of the Moschino brand.

Listed on the Euronext Star Segment of Euronext Milan Market of Borsa Italiana, Aeffe Spa is a fashion company that operates in the prêt-à-porter, and footwear and leather goods sectors with a portfolio of international brands, including Alberta Ferretti, Philosophy di Lorenzo Serafini, Moschino and Pollini.

The company reported its first half yearly financial results, inclusive of Q2 FY24 performance, according to which the consolidated revenues reached €138.6 million ($153 million) compared to €162.9 million (~$180 million) in 2023, decreasing 14.6 per cent at constant exchange rates and 14.9 per cent at current exchange rates. Group’s net loss also expanded from €11.7 million ($13 million) to €20.4 million ($22.53 million) for the same period.

Revenues of prêt-à-porter, and footwear and leather goods divisions decreased 12.5 per cent and 25 per cent at current exchange rates, respectively. Sales decrease in Italy was 15.5 per cent, 16.2 per cent in Europe, 25.6 per cent in America, and 7.4 per cent in Asia & Rest of the World. The decrease in revenues impacted EBIT margins.

As of June 30, 2024, company’s net working capital amounts to €84.5 million, or 28.7 per cent of revenues on an annual basis, compared to €89.6 million as of December 31, 2023, or 28.1 per cent of revenues on an annual basis.

QVC (Qurate Retail, Inc) | (NASDAQ: QRTEA, QRTEB, QRTEP)

Qurate Retail Group delivered a weak performance in its second quarter of FY24. Compared to same quarter last year, the total revenue of NASDAQ-listed company declined 9 per cent in USD terms and 8 per cent in constant currency terms. Excluding Zulily, revenue decrease is 5 per cent (in USD) and 4 per cent (constant currency). The total revenue in Q2 FY23 was $2,649 million, which reduced to $2,407 million in Q2 FY24. For the company, the operating income reduced to $165 million versus $366 million during the comparable period—a significant drop of ~55 per cent; EBIT reduced 74.6 per cent from $185 million to $47 million; and net earnings attributable to Qurate Retail shareholders also reducing 81.3 per cent to $20 million.

Qurate Retail is a Fortune 500 company comprised of six leading retail brands – QVC, HSN, Ballard Designs, Frontgate, Garnet Hill, and Grandin Road. The Colorado-based company announced its Q2, FY24 financial results in early August.

Fibre2Fashion News Desk (WE - SB)