This story first appeared in the March 22, 2013 issue of WWD. Subscribe Today.
PARIS — Against the backdrop of disappointing first-quarter results, Hennes & Mauritz AB said it is ramping up expansion and getting ready to introduce a sports collection in 2014.
The company said Thursday it will open 350 stores in 2013 instead of the 325 previously planned. “The growth target is to increase the number of stores by 10 to 15 percent per year with continued high profitability, while at the same time increasing sales in comparable units,” the company said Thursday.
Most new doors will open in China and the U.S., including two new H&M flagships in Manhattan later this year. Launches in Chile, Estonia, Lithuania, Serbia and — via franchise — Indonesia are also scheduled for 2013, while Australia is said to follow next year.
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Estonia, Lithuania and Serbia will see two units each.
“We are also looking at more markets in the Southern Hemisphere, as we see great anticipation ahead of the opening in Chile,” said Nils Vinge, H&M’s head of investor relations during a conference call. The series of new openings brings “new opportunities even though the microeconomic environment is tough,” he said.
The global store count stood at 2,818 in 48 countries on Feb. 28, versus 2,491 stores last year.
A giant leap forward is expected this summer, when H&M will finally launch its online sales platform in the U.S., the world’s largest online market.
The Swedish fast-fashion chain, which is lagging behind with its online expansion, said it was working on its long-term investments in IT, online and the & Other Stories concept, which “has been tremendously well received at its launch this March.”
“Sales, both in stores and online, have far exceeded our expectations,” said group chief executive officer Karl-Johan Persson.
At the beginning of 2014, an “extended sports concept for women, men and children” will be introduced, broadening H&M’s range to include “sportswear and accessories in specially developed functional materials suited to various kinds of sporting activities.” The range will be initially sold in H&M’s existing online markets and select H&M stores in 15 countries, but will not include footwear.
“We have invested substantially in this concept and will continue to do so. We see very interesting potential. This is really a big thing,” said Vinge.
Expansion also continues for other brands of the group, though at a slower pace. Monki and Weekday will launch in Japan in spring of this year. A Monki shop will also open in Paris in spring, while Cheap Monday will follow in the fall. Non-H&M brands still represent a very small part of the group’s portfolio, though Vinge would not divulge any figures.
H&M, which will post its annual results on March 26, said after-tax profits in the first fiscal quarter fell 11.4 percent to 2.46 billion Swedish kronor, or $378.8 million, compared with the corresponding period last year.
“Profits have been negatively affected by large long-term investments but also by substantial negative currency translation effects,” the group explained.
Gross margin stood at 55.2 percent compared with 55.8 percent in the previous year.
All dollar rates are calculated at average exchange rates for the three-month period from Dec. 1 to Feb. 28.
“The first quarter has been characterized by the continued challenging situation for the fashion retail industry in many of our markets mainly due to a continued tough macroeconomic climate, but also due to unfavorable weather during parts of the quarter,” said Persson.
The group’s sales were up 2 percent to 33.1 billion Swedish kronor, or $5.1 billion, in the first quarter compared to the same period last year.
Although sales were strong in Asia, with China in the lead, “sales in the first quarter did not reach our expectations,” said Persson. This was especially true for Germany, H&M’s main market, where business was slow.
Shares of H&M closed up 0.71 percent to 228.2 Swedish kronor, or $35.32, on the Stockholm Stock Exchange.