(Source: Business Week)
With the credit crunch in full swing, retailers around the world are slashing prices and shuttering shops. But Sweden's Hennes & Mauritz (HMB.ST), a pioneer of cheap but chic fashion, is managing to buck the trend: opening stores, entering new markets, and adding new brands. "Our strategy is based on the concept of fashion and quality at the best price," says H&M Chief Executive Rolf Eriksen. "It helps us stay balanced even during economic downturns."
Defying tough times, H&M will enter one of the world's most competitive fashion markets with the opening of its first store in Japan on Sept. 13. The initial outlet, in Tokyo's Ginza shopping district, will be followed by a second store in Harajuku on Nov. 8. At the same time, H&M will also launch its latest high-profile design collaboration with Japanese designer Rei Kawakubo, the founder of cutting-edge fashion brand Comme des Garons. A third Japanese store in Shibuya is expected to open next fall.
The fashion chain's arrival is bound to thrill members of its Japanese H&M fan club, who already number 20,000. "With H&M's track record in entering new countries, the strong interest in fashion in Japan, and the existing H&M fan club, H&M has a good chance of doing well there," says Erik Sandstedt, retail analyst at Kaupthing (KAUP.ST) bank in Stockholm.
A Global Expansion Indeed, as a purveyor of stylish clothing for reasonable prices, H&M sees the economic slowdown as an opportunity to expand. With its entry into Japan, the company will boast more than 1,600 stores in 30 countries, including China, where it launched in 2007. Over the next year, the company plans to increase the number of its stores by as much as 15%, focusing expansion on the U.S., Europe, and Japan.
As economic conditions worsen, H&M, which leases its store sites, is finding it easier to secure prime locations at better terms, especially in the U.S., where the company now has 153 stores, mainly on the East and West coasts. "We're getting much better deals now that we are a known player in the U.S." says H&M's head of investor relations, Nils Vinge. "Landlords are approaching us."
How is H&M managing to thrive in what many observers call the toughest trading conditions in decades? Credit a relentless focus on costs that extends from the company's merchandise to its business model. For starters, H&M's average sale prices are lower than those of its main rivals, Spain's Zara, owned by parent company Inditex (ITX.F), and the Gap (GPS). This will enable the Swedish chain to gain "market share in the current downturn, as consumers trade down in search of better value," says Kaupthing analyst Sandstedt.
The Outsourcing Advantage H&M's biggest advantage is its business model.
