Last week, Deutsche Bank called an end to the fast-fashion boom, recommending investors sell shares of Zara-owned Inditex and H&M Group, and labeling the owner of Primark as one of its “least preferred” retail stocks. Fast fashion has been on a tear the last few years (or last few decades, depending on how you look at it). One analyst’s judgment is hardly a sign the end is nigh – Inditex shares are still up 50 percent this year, and Deutsche’s sell rating is alone among over 30 analyst recommendations for the stock, according to Bloomberg. But it’s a sign there are some clouds on the horizon.

The biggest is demand. There are growing signals that consumers are finally pulling back from their post-pandemic shopping binge. The good times lasted much longer than practically anyone expected, and fast fashion, along with luxury, claimed a disproportionate share of the spoils. But Black Friday sales, while up overall in the US, aren’t growing at the same pace they did in 2021 and 2022 (the UK picture is more unambiguously negative). Inditex’s third-quarter results this week should shed some light on how consumer behaviour is shifting.

A slowdown, or even just slower growth, will require increased spending on marketing, one of the triggers for Deutsche’s dour forecast. Another factor is the escalating war with Shein. Zara, H&M and other fast-fashion chains are tricking out flagship stores with beauty salons, tailors and other features that online-only rivals would be hard pressed to match.

It’s a smart strategy, but an expensive one, especially given that these chains were laser-focused on reducing physical retail costs by closing underperforming stores. Brick and mortar is only going to get more competitive, with Shein teaming up with with Forever 21 to build an offline presence, and Primark and Uniqlo planning dozens of new US locations. Zara and H&M still have scale and brand loyalty on their side, but they’ll have to spend to protect those advantages.

So have we hit peak fast fashion? Almost certainly not, but from here on out, gains will be hard won.

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