Spanish fashion retail giant Inditex is better placed to weather the financial storm than archrival H&M because of its speed-to-market advantage and more diversified sourcing, according to industry analysts.

Luca Solca, analyst at Sanford Bernstein, said Inditex's flagship chain Zara continues to benefit from "strong momentum" for its brand and an ability to supply stores with the "right merchandise and styles" faster than H&M and other rivals.

This time-to-market advantage, achieved through a very tight supply chain, will help Inditex boost sales at a time when consumers are tightening their wallets around the world.

"Right now, people are only going to spend on the right product and Inditex is better at supplying the right styles and products than rivals," Solca said.

According to an analyst consensus, Inditex and H&M's earnings per share will each rise by about 9% this year but Zara's competitive lead will put it ahead of H&M in the medium term, Solca said.

Zara's inventory costs will also fall below those of H&M, which sources 70% of its merchandise from Asia compared to 35% for Inditex, the analyst said.

As the US dollar appreciates against the Euro and the kronor, buying dollar-traded Asian apparel has become increasingly expensive.

Other analysts agreed with Solca.

In a research report, JP Morgan said Zara will fare the expected recession better than H&M, helped by its lower inventory costs.

However, it cut its EPS projections by 2% this year and 4% by 2009, citing difficult trading conditions.

Solca has a EUR34 objective price for Inditex, down 15% from EUR40 earlier this year. The stock has plunged 37% since January, however.

For H&M, he has an SEK270 objective price, down 24% from SEK335 before.

By Ivan Castano-Freeman.