Over the past few years, there has been a big shift in the fashion industry, specifically in the consumer’s mindset. For years, the majority of the population didn’t know where or honestly care where their clothes came from or what they were made of, but that has changed.
Today’s consumer wants to know who made their clothes, as well as if they were treated and paid fairly; they also want to know what their clothes are made of and if the company is using sustainable practices. The customers aren’t alone; the world’s governments also want answers to these questions, and they have begun implementing some serious changes in the way retail brands are allowed to manufacture and sell their products.
In fact, the ESG, or the Environmental, Social, and Governance standards that impact how companies receive investments, are currently looking directly at fast-fashion brands that have historically used extremely non-sustainable and even unethical practices.
An analyst at Deutsche Bank, Cochrane, told the world this week that the ESG will likely force many fast-fashion brands such as H&M, Zara, and even China’s Shein to drastically change their tactics and policies within the next few months. These changes will lead to companies paying more for labor and materials, which will increase the price tags on their products. France has already implemented a few of these regulations by urging its citizens to skip the Black Friday sales this year, as well as offering subsidies if someone repairs their old clothes at home.
Therefore, Cochrane says, in addition to consumers already being wary of fast fashion for ethical reasons, now, with the higher costs, these brands are going to see an immediate and significant decline in sales within just a few weeks. And according to research conducted by Deutsche Bank, the desire for fast fashion is going to be all but eliminated by 2024.
This information is especially important to those who have investments in Inditex, which owns Zara and H&M. Deutsche Bank’s warning is clear to those people and companies: sell the shares in either of these brands as soon as humanly possible. Shares of both Inditex and H&M fell over 1% last Wednesday afternoon, and Cochrane and Deutsche Bank are expecting them to fall much farther in the coming weeks and be all but worthless by next year.
Instead, Deutsche explains, investors should be putting their money into retailers such as Marks & Spencer from the UK as their customers are older, weather, and less fickle with their selection. Plus, Marks & Spencer is less likely to be affected by the new EGS requirements.
The bottom line: Fast fashion is absolutely on its way out as both a popular option for clothing and as a smart financial investment. For those who have the stocks, sell them now, and for those who still enjoy shopping at these stores, go quick before the prices increase in the coming weeks.
