Inside Fast Fashion: Why Nasty Gal and Others Are Seeing Growth and H&M’s Profits Are Declining

Fast fashion may not be the industry-swallowing force that it once was, but there are some players that are still seeing breakneck growth.

Boohoo Group Plc, the U.K.-based online fashion powerhouse behind Boohoo, Nasty Gal and PrettyLittleThing, reported half-year earnings on Wednesday and posted record pretax profits of £24.7 million (approximately $32.5 million) in the six months ended Aug. 31, an increase of 21 percent over the same period in 2017.

The retailer’s strengths lie in its budget-friendly, trend-driven offerings and its ability to get product from design to market in about two weeks, compared with the four- to six-week standard among its peers. This speed, along with its e-commerce aptitude, has helped the company steal market share from rival H&M, which has seen declining profits and store closures over the past several quarters.

Boohoo’s PrettyLittleThing brand in particular performed exceptionally in the first half of the year, with revenues up 132 percent to £168.6 million ($222.2 million) and active customers almost doubling to 4 million. Nasty Gal, which Boohoo acquired out of bankruptcy early last year for $20 million, also more than doubled its revenue to £17.7 million ($23.3 million) — a fraction of the $100 million in sales the brand reportedly generated during its height in 2012 under former ownership but hardly a disappointing result.

Meanwhile, Boohoo’s namesake brand, the most mature in its portfolio, posted more modest growth of 15 percent on the back of a buzzy collaboration with Paris Hilton this summer and rising brand awareness.

The company raised its forecast for full-year revenue growth to between 38 percent and 43 percent, from the previous range 35 percent to 40 percent, and investors responded in kind, boosting the stock 11 percent on Wednesday.

“All of our brands performed extremely well across all territories as we continue to gain market share,” joint CEOs Mahmud Kamani and Carol Kane said in a statement.

Of course, this is hardly a good omen for H&M, which will report nine-month results on Thursday. Its stock has sunk more than 60 percent in the past three years, and despite a rebound in the retail sector overall this year, it will have to stay ahead of its competition to reap the rewards.

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