H&M Has Lagged Behind Zara Owner Inditex In Online Shopping. Both Stocks Fell.

The Covid-19 pandemic caused sales to slump at retail giants Inditex and Hennes & Mauritz (H&M) in November, reversing glimmers of a recovery and shining a light on the very different online sales performance between the two companies.

Shares in both companies fell in European trading, with Inditex, which owns Zara, trading near 2% lower and H&M dropping more than 2% on Tuesday.

The back story. As global coronavirus infection rates slowed through the summer and government restrictions were loosened, shoppers flocked back to stores after months of retail closures. Both Spanish Inditex and Swedish H&M—the largest and second-largest fashion chains in the world, respectively—returned to profitability in the autumn after large losses.

With the Covid-19 pandemic keeping millions of shoppers housebound, Inditex has made a key investment in expanding online shopping. In June, the company announced a €2.7 billion ($4.34 billion) investment plan to improve online operations and increase store footprint, of which €1 billion was earmarked for digital investments.

H&M, still controlled by its founding Persson family, was already struggling before the pandemic hit. The company has been slower to shift to online shopping in favour of its more than 5,000 stores and the low-cost fashion strategy it helped pioneer.

What’s new. Both companies reported results on Tuesday—Inditex for the three months to the end of October, and H&M for the quarter ending Nov. 30 as well as the full year.

Store and online sales grew slowly from August to October at Inditex, with October sales at 94% of 2019 levels at constant currencies. In total, net sales of €6.1 billion in the third quarter were 14% lower than the same period in 2019. However, as coronavirus cases surged in November, 21% of stores remained closed and sales fell to 81% of 2019 levels.

At H&M, net sales for the fourth quarter were 10% lower in local currencies from the same period last year. Much of that came in the final month: sales were down by just 3% year-over-year from Sept. 1 to Oct. 21, but were 22% lower than 2019 in the period from Oct. 22 to Nov. 30.

Looking ahead. The results from the retail giants show the impact the second wave of Covid-19 has brought on sales. Fears over how much this hurts the bottom line for the full year is what may have caused both stocks to fall.

But the results also shine a light on the companies’ different online strategies—a crucial sales platform beyond the pandemic. Inditex reported that online sales grew 76% in the nine months to the end of October, while analysts expect H&M to lag far behind. The Swedish retailer didn’t post any fresh online figures on Tuesday. It had posted online sales growth of 40% in the second quarter and just 27% in the third.

China’s securities regulator is ramping up support for the country’s embattled equities markets, announcing measures to funnel capital into Chinese stocks.

The aim: to draw in more medium to long-term investment from major funds and insurers and steady the equities market.

The latest round of policy boosts comes as Chinese stocks start the year on a soft note, with investors reluctant to add exposure to the market amid lingering economic woes at home and worries about potential tariffs by U.S. President Trump. Sharply higher tariffs on Chinese exports would threaten what has been one of the sole bright spots for the economy over the past year.

Thursday’s announcement builds on a raft of support from regulators and the central bank, as officials vow to get the economy back on track and markets humming again.

State-owned insurers and mutual funds are expected to play a pivotal role in the process of stabilizing the stock market, financial regulators led by the China Securities Regulatory Commission and the Ministry of Finance said at a press briefing.

Insurers will be encouraged to invest 30% of their annual premiums earning from new policies into China’s A-shares market, said Xiao Yuanqi, vice minister at the National Financial Regulatory Administration.

At least 100 billion yuan, equivalent to $13.75 billion, of insurance funds will be invested in stocks in a pilot program in the first six months of the year, the regulators said. Half of that amount is due to be approved before the Lunar New Year holiday starting next week.

China’s central bank chimed in with some support for the stock market too, saying at the press conference that it will continue to lower requirements for companies to get loans for stock buybacks. It will also increase the scale of liquidity tools to support stock buyback “at the proper time.”

That comes after People’s Bank of China in October announced a program aiming to inject around 800 billion yuan into the stock market, including a relending program for financial firms to borrow from the PBOC to acquire shares.

Thursday’s news helped buoy benchmark indexes in mainland China, with insurance stocks leading the gains. The Shanghai Composite Index was up 1.0% at the midday break, extending opening gains. Among insurers, Ping An Insurance advanced 3.1% and China Pacific Insurance added 3.0%.

Kai Wang, Asia equity market strategist at Morningstar, thinks the latest moves could encourage investment in some of China’s bigger listed companies.

“Funds could end up increasing positions towards less volatile, larger domestic companies. This could end up benefiting some of the large-cap names we cover such as [Kweichow] Moutai or high-dividend stocks,” Wang said.

Shares in Moutai, China’s most valuable liquor brand, were last trading flat.

The moves build on past efforts to inject more liquidity into the market and encourage investment flows.

Earlier this month, the country’s securities regulator said it will work with PBOC to enhance the effectiveness of monetary policy tools and strengthen market-stabilization mechanisms. That followed a slew of other measures introduced last year, including the relaxation of investment restrictions to draw in more foreign participation in the A-share market.

So far, the measures have had some positive effects on equities, but analysts say more stimulus is needed to revive investor confidence in the economy.

Prior enthusiasm for support measures has hardly been enduring, with confidence easily shaken by weak economic data or disappointment over a lack of details on stimulus pledges. It remains to be seen how long the latest market cheer will last.

Mainland markets will be closed for the Lunar New Year holiday from Jan. 28 to Feb. 4.

H&M Has Lagged Behind Zara Owner Inditex In Online Shopping. Both Stocks Fell.

The latest round of policy boosts comes as stocks start the year on a soft note.