Daniel Kulle, H&M’s new president of North America, has a can-do attitude.
Neither the recession that has sapped consumers’ fervor to shop nor the competition from lower-priced mass merchants has dampened Kulle’s desire to expand in the U.S. “The potential in the U.S. market is very big,” he said. “We have the strength of a very good business. We have the people here. We have logistics, with three distribution centers. We have the framework to move more [product].”
Of H&M’s 169 U.S. stores, most are on the East and West Coasts and in the middle of the country. Now the retailer wants to make a move on the South. In addition, Kulle said, “there’s loads of potential in Manhattan, Chicago and Los Angeles. We have seen that the U.S. customer likes us.”
At the opening of H&M’s 10th Manhattan unit, a 25,758-square-foot, two-level store that bowed in May on the corner of 86th Street and Lexington Avenue, 200 people waited in line for the doors to open. Meanwhile, a store opening at the Florida Mall in Orlando drew more than 800 consumers.
“At the moment, we have to open stores in the big cities,” Kulle said. “The next is Phoenix. In the long run, we’ll be looking everywhere. We will not turn down any opportunities. We can open smaller stores. That’s the beauty of it. We can make a big, 20,000-square-foot store or a 10,000-square-foot ladies’ store in South Coast Plaza [in Costa Mesa, Calif.]. We have that flexibility.”
Kulle said stores could be segmented into women’s only, men’s only and children’s only.
“Every day we’re looking at building more distribution centers,” he said. “We want to lower operations and transportation costs. Retailing is a lot of logistics.”
H&M, which was one of the first retailers to make daily deliveries to stores, ships the same core assortment to all its units, but tests new products in smaller volumes in certain locations. Stores in big cities receive an extra fashion assortment and trendy merchandise. Use of organic cotton and recycled fabrics, including those made of wool and polyester, is growing. “It’s a demand from customers,” said Ann-Sofie Johansson, head of design.
“There’s an opportunity for new customers who may have shopped at department stores to come to our stores,” Kulle said. “Our garments and price points are the message.”
Not that H&M has escaped the economy unscathed. Hennes & Mauritz AB reported a worse-than-expected dip in September sales, citing the continuing recession and unusually warm weather in most of its markets. Same-store sales in September declined 8 percent compared with analysts’ expectations of a 7 percent drop. The retailer in August reported a weaker-than-expected 11 percent decline in comparable-store sales.
“We have been affected by the current situation in the economy,” Kulle said. “When the economy comes back, people will feel that H&M has the products for them. We’ve made improvements in the value chain.”
Topshop, which opened in March, goes head-to-head with H&M in Manhattan’s SoHo neighborhood, where both retailers have stores on Broadway. “It’s hard to compare one shop in New York City,” Kulle said, referring to the U.K. retailer. “[Topshop is] not new for us because we have met them in Europe. Competition makes us stronger and brings traffic. From my perspective, the U.S. is a very tough retail market. We bring ideas from the U.S. to Europe, the Middle East and Asia.”
Kulle, whose responsibilities include the 55-unit Canadian market, said there’s still room to expand there too. “We’re hoping to have more stores in the west in places like Vancouver,” he said.
France, Germany and Spain are H&M’s top growth markets in Europe. H&M will enter South Korea in the spring and open its first store in Beijing later this year. “In China, we are really entering with full speed,” Kulle said, noting 13 units are already operating in Mainland China. The retailer has been successful in Russia, where four units have bowed. “We have a very good franchise operator in the Middle East, where we’re in eight countries,” he added.
H&M has a diversity of price, Kulle said, citing modern classic suiting for men and the tailored concept for women at the high end. Items in the Jimmy Choo collection bowing Nov. 14 are pricier, including leather over-the-knee boots for $299. H&M, which was one of the first fast-fashion brands to partner with designers for one-off collections, is taking a slightly different tack now that the practice has become ubiquitous. Rather than introduce another apparel line, H&M tapped Jimmy Choo to design its signature sexy footwear, handbags and jewelry at a fraction of Choo’s regular prices. Choo’s first foray into apparel includes a blue suede one-shoulder dress, $129; a black jumpsuit, and a suede trimmed dress.
H&M launched its own shoe collection for fall and plans to continue to develop it. “We’re definitely growing shoes,” Kulle said.
A designer partnership with Sonia Rykiel will yield lingerie in December and continue in February with a Rykiel knitwear line and accessories for women and girls. “No one has done a designer collaboration for children’s wear,” Kulle said, perhaps overlooking Stella McCartney’s recent tie-up with GapKids.
H&M employs more than 100 in-house designers at its headquarters in Stockholm. Johansson works closely with eight designers from each department, identifying trends and colors for the following season. “I travel quite a lot, go to flea and vintage markets and go to movies and read magazines,” she said. H&M is a flat organization and its culture is one where employees are developed and promoted internally. Johansson’s first job was working the till at an H&M store in Stockholm. After two years, she wrote a letter to Margareta van den Bosch, H&M’s former creative adviser. Johansson put together a portfolio and was hired as a design assistant. “Now I’m head of design taking over for Margareta,” she said.
Concerned its work environment was dated, H&M recently moved to gleaming white offices with good light and an excellent canteen. The company is now remodeling its Fifth Avenue flagship for the same reason. “We’re making a statement that we are a fashion company,” said Kulle. “The store will have a ‘wow’ component. Ladies and men’s are divided on different floors. There are huge fitting rooms, updated fixtures and graphics and many points of sale.”
The flagship will be the first U.S. unit to have the new design, which was adapted from H&M’s top store in Tokyo. The redo will be unveiled on Nov. 5. Kulle said the SoHo unit will be remodeled next year.
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