The titans of European retail are firm rivals - but their recent fortunes have contrasted significantly.

Zara's Spanish owner Inditex has seemed almost immune to the economic climate while Sweden's H&M struggled.

Not any more it seems.

The world's second largest fashion retailer is giving its rival a run for its money.

It's just reported its first rise in gross profit margin in more than three years, beating expectations.

Nils Vinge is Head of Investor Relations at H&M

(SOUNDBITE) (English) HENNES & MAURITZ HEAD OF INVESTOR RELATIONS NILS VINGE SAYING:

"We do see some positive signs here and there even though we still have a deep respect for the very tough macro environment in most of our markets and we think will stay for long."

Strong demand for summer collections and cost controls have helped - so too has the economic revival in Europe where H&M has most of its 3,000 stores.

Richard Perkins from Mintel.

(SOUNDBITE) (English): RICHARD PERKS, DIRECTOR OF RESEARCH, MINTEL, SAYING:

"Germany is H&M's biggest market by far - they are a very powerful player there - and things have just been picking up there. Consumer confidence has recovered with the economic recovery and when that happens Germans are generally prepared to go out and spend and they don't do that very often."

When it comes to share price rises this year H&M is winning hands down.

Its shares have risen 25% over the past three months compared to Inditex's 0.2%.

So where next for H&M?

Inditex benefitted by expanding aggressively in Asia and other emerging markets during the downturn.

H&M has only recently started to play catch up - with 350 new stores this year, most in China and the States.

Karl-Johan Persson is H&M's CEO.

(SOUNDBITE) (Swedish) HENNES & MAURITZ CHIEF EXECUTIVE KARL-JOHAN PERSSON SAYING:

"We have a continued, substantial expansion. We are growing in existing markets with our physical shops and online shops. We are entering new countries and we're growing with all our brands."

H&M is now selling online in nine countries.

That's still less than Inditex.

But last month's online launch in the States has had a good start.

 

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