H&M : Hennes & Mauritz (Sweden)
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You may not immediately think of Sweden as a country famous for its fashion, but its H&M chainstore has successfully conquered the globe, now with more than 3,100 stores in over 53 countries. H&M is one of Europe's two leading clothing brands, seemingly immune from the woes than have plagued many other retailers, not least US rival Gap during the 2000s. One key selling point has been H&M's annual collaboration with different star designers. Among the many luminaries who have already loaned their names to the chain are Madonna, Karl Lagerfeld and Stella McCartney. Although Europe is the group's stronghold, H&M is one of the few foreign fashion retailers to have established a successful foothold in the US market, now its second-largest territory by sales. The group took its first steps into Asia in 2007 and 2008 with outlets in China and Japan, and arrived in Latin America for the first time in 2012. H&M's most serious global competitor is the similarly forward-thinking but even more nimble Spanish group Inditex, and it has followed that group's lead in recent years by rolling out several satellite brands to support the main H&M chain.
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H&M Hennes & Mauritz
In 2007, H&M also began experimenting with a multibrand strategy similar to that pursued by rival Inditex, opening a more classically styled premium fashion chain under the name Collections of Style, or COS. By mid 2013 there were 69 outlets in Germany, the UK and a few other European markets. So far, however, the success of the new label has been comparatively modest. In 2008, the group acquired majority control of another Swedish fashion company, Fabric Scandinavien, which operates the Weekday and Monki chains as well as clothing brand Cheap Monday, also sold through third party outlets. It took full control of the business in 2010. The most successful of this trio has been Monki, expanded to 64 outlets in 10 countries by mid 2013. There have been repeated rumours that the group is also considering the launch of a luxury clothing brand, positioned above all of its other labels. It launched the H&M Exclusive Glamour Conscious Collection of higher-priced upscale dresses in 2012, and may expand that line with a fully fledged standalone brand. It has announced plan to launch a new global retail brand in Spring 2013, positioned at a slightly higher price to H&M, and called & Other Stories.
Unlike some other international retailers, H&M owns virtually all its outlets worldwide. Towards the end of 2006, the first two franchised shops were opened in Dubai and Kuwait, and further franchise operations have followed in other Middle Eastern and Asian markets. Otherwise all stores are owned and operated by the group. Total store numbers at the end of Nov 2013 were 3,132 outlets, of which more than 90% were under the main H&M brand. In mature markets the group has begun to complement full-line stores with niche concept outlets targeting specific segments, for example, teenagers, lingerie or accessories, and more recently H&M Man, which opened its first outlet in Germany in 2004. Germany is H&M's biggest market by far, with 418 stores, and gross sales (inc tax) in 2013 of SEK 34.1bn (E3.95bn), almost three times higher than the next biggest market (the US) on less than twice the number of outlets. H&M acquired Gap's 10 stores in that country in 2004 after the US retailer decided to close down its operations there.
Other important markets are France, where the group has 197 stores with gross sales of SEK 10.6bn (E1.2bn); the UK, with 245 stores, and sales of SEK 10.3bn (E1.2bn); and its home base in Sweden, with 177 stores and net sales of SEK 8.3bn. There are outlets in all the other important European countries, with Portugal, Poland, the Czech Republic and Italy joining the portfolio during 2003. Slovenia joined the club in 2004, followed by Ireland and Hungary in 2005, China in 2007, Japan in 2008, Russia in 2009 and South Korea and Turkey in 2010. The first outlets opened in Singapore, Romania and Croatia in 2011, followed by Malaysia and Thailand and other markets in 2012. H&M opened its first store in Latin America in Mexico in 2012, and launched into the Southern hemisphere for the first time in 2013 with an outlet in Chile. The Philippines and Australia will join the portfolio during 2014, followed by South Africa in 2015. However, the biggest and most exciting challenge has been the US. H&M opened its first store in New York in 2000 and now has 305 outlets across the country, with gross sales of SEK 13.7bn (E1.6bn or $2.0bn) in 2013, making it H&M's #2 market by sales.
The group runs a catalogue mail order business in Scandinavia, H&M Rowells, which also manages internet orders in that region and, from 2006, in the Netherlands. Online sales were extended to Germany and Austria in 2007, and in the UK and other markets from 2010. They launched in the US in 2012. A home furnishings collection was introduced in 2009 for mail order and online customers in those countries. All clothing is designed in Stockholm, with production farmed out to more than 800 independent suppliers around the world, primarily in China, Bangladesh and Turkey. There are 20 production offices around the world in Europe, Asia and Africa.
Revenues and store numbers have more than doubled since 2003, yet the group's break-neck expansion has been challenged since 2011 by economic concerns, rising costs and especially currency fluctuations affecting the Swedish Krona. In the year ending November 2011, net revenues edged up by just 1% and net profit fell 15%. Performance for 2012 was better, with net revenues rising 10% and net profit up 7%. But comparable sales for the year to 2013 were flat, and only further expansion prompted the 6% increase to SEK 128.56bn (E14.9bn). Net profit edged up less than 2% to SEK 17.15bn (E2.0bn). H&M is Sweden's biggest company by value with a market capitalisation of around $60bn.
The company is well-known for its firm control of overheads. Lavish executive expenditure is unknown - senior staff shuttling between countries fly economy, taxis are frowned on and few staff even have a company mobile phone. Instead the company spends money where it counts, on logistics and marketing. Although advertising is created in-house, media expenditure is significant. The group also sponsors Swedish show jumping stars Malin Baryard-Johns and Peder Fredericson.
Management: Stefan Persson is chairman of H&M, as well as Sweden's richest man, with a fortune estimated by Forbes magazine at $26bn in 2012. He was group CEO from 1982 to 1998. The family controls almost 70% of H&M's voting shares and 36% of equity. Eldest son Karl-Johan Persson was appointed as CEO in July 2009. Other senior officers include Ann-Sofie Johansson (design director), Bjorn Magnusson (director of business development) and Anna Tillberg Pantzar (director of marketing & brand).
Background: The group's founder, Erling Persson, was originally a salesman in the family cheese business. But, during a trip to the US, he was greatly impressed by American stores which sold large volumes of clothing at low prices. He set out to replicate that approach in Sweden, opening his first shop in Vasteras, Sweden, in 1947. He called it Hennes, the Swedish word for "hers", because he sold only womenswear, sourced from numerous independent designers and manufacturers in and around Stockholm. Crucially he set out to keep prices as low as possible in order to undercut the country's generally expensive department stores.
This approach soon proved popular with consumers. During the 1960s the company moved into neighbouring Scandinavian territories Norway (in 1964) and Denmark (1967). In order to expand further in his home country, Persson acquired Mauritz Widforss, a small Stockholm-based business selling sporting apparel and goods for the men's market. In recognition of this development, the group changed its name to Hennes & Mauritz.
The company went public in 1974, and opened its first store outside Scandinavia in the UK in 1976. But the real expansion began during the 1980s after the appointment of the founder's son, Stefan Persson, as managing director. He recruited the group's first team of inhouse designers (previously all clothing had been sourced externally), acquired Scandinavian mail order company Rowells, and also ramped up expansion into other territories. Between 1989 and 1998, the country opened offices in six new territories, capping this with the launch in Spain and the US in 2000. In general the group has a policy of entering at least one new country each year.
Last full revision 3rd September 2013; updated 5th February 2014
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