By Miles Socha
with contributions from Anna Merida Zauner
 on December 2, 2009

PARIS — Karl-Johan Persson — the architect behind Hennes & Mauritz AB’s recent move into home furnishings and the 2007 launch of its more upscale COS chain — said the Swedish giant likely would open its first home stores soon, and put more firepower behind the COS concept next year.

This story first appeared in the December 2, 2009 issue of WWD. Subscribe Today.

But the new 34-year-old chief executive officer of Europe’s second-largest fast-fashion retailer stressed that its flagship banner, and its cheap and chic proposition, remain the cornerstones of his strategy.

“We are focusing on this business idea,” said the executive, in Paris Tuesday for the unveiling of the Sonia Rykiel for H&M collections. “I think the value trend has been going on for some time — even before the crisis.”

In his first interview since taking the helm of H&M in July, the grandson of late founder Erling Persson and son of board chairman Stefan Persson said the company has continued to operate profitably even as sales in recent months have sunk to levels below market expectations — and the company’s own targets.

In October, sales from established stores declined 3 percent, which H&M blamed on weak sales in France, Spain and the U.S., even as sales in Scandinavia, Central Europe and Asia were described as satisfactory.

Persson gave no forecast for when the situation might improve, but said he would stay the course. “We’re investing in rebuilding stores. We’re investing in IT systems to improve logistics and buying,” he said, pitched forward on a sofa in a modest suite at the Westin hotel here. “We have a good position today and we will stand stronger when the economy improves. We want to prove that when it comes to this idea — fashion and quality at the best price — it’s about micro-improvements every day.”

He also declined to discuss figures, but cited a general goal of 10 to 15 percent annual growth in new stores and “improved” like-for-like sales in existing stores while maintaining profitability.

Dressed in a slim black COS suit and white shirt, Persson spoke candidly about intense competitive pressures from a range of fast-fashion players; mass market giants such as Carrefour, Wal-Mart and Asda, and even small, local brands such as the hot Swedish contemporary players Acne, Hope and Whyred.

Yet he asserted H&M continues to be more disciplined than its competitors in terms of markdowns, which protects its margins, and more cautious with inventory levels, which might have dented sales growth somewhat. He also blamed unseasonably warm weather for lackluster sales of outerwear and other cold-weather apparel in recent months.

A calm, articulate man with few airs, Persson said H&M would continue its global march and open in two new markets next year — South Korea and Israel — and plant a long-awaited flagship on the Champs-Elysées here, a 30,000-square-foot unit designed by acclaimed French architect Jean Novel. The company also will expand online sales to the U.K. next year. E-commerce is available only in Sweden, Norway, Denmark, Finland, Austria, the Netherlands and Germany.

The company opened 240 H&M stores this year, more than the 225 it had planned, along with 10 locations for COS, bringing the complement to 23, Persson said. He declined to pinpoint how many more COS locations might open, but stressed: “We’re very happy with the development. It will be a good expansion next year, as well.”

The firm quietly opened the first retail showcase for its home furnishings range in September at one of its Stockholm H&M stores, and the first freestanding store for trendy jeanswear brand Cheap Monday last week in Copenhagen. In 2008, H&M acquired a controlling stake in Fabric Scandinavian AB, owner of Cheap Monday and contemporary fashion chains Weekday and Monki.

Still, Persson said the bulk of H&M’s growth would come from its core brand and continued expansion in core European markets, as well as North America and recently entered markets such as Russia, Japan and China.

Persson — who is married and has two young children, ages one and six — said he literally “grew up” into the H&M universe, with his grandfather and father distilling in him its unique corporate culture.

“H&M is very much about teamwork, about constant improvements,” he said. “It’s about a straightforward culture: to be open-minded, open to new ideas. And a cost-conscious way of running a business.”

Asked if he is most comfortable in the office, the sales floor or the design studio, Persson said with a laugh: “Fortunately for H&M, I don’t spend that much time in the design studio, but I like to watch the work. We have 120 designers.”

Rather, he favors daily store visits in the 37 countries where H&M operates — its own and competitors — to keep close tabs on an apparel market he describes as fiercely competitive, and with no signs of slowing down. “Competition is very tough. It’s very challenging, and this I like,” said Persson, also a fan of competitive sports, from tennis and soccer to floor hockey.

While the launch of Rykiel lingerie in some 1,500 H&M stores on Saturday comes only two weeks after shoppers snapped up leather goods and accessories in collaboration with Jimmy Choo, Persson said H&M is not deliberately stepping up the pace of its designer tie-ups. “It’s down to ideas coming up and opportunities coming up,” he said.

While he declined to quantify the sales impact of the one-off lines, he said: “It has been good for the business — absolutely. Some customers had never been to H&M before. They see the designer assortments and they realize we also have some very good designs ourselves.

“It’s created a huge interest and it seems like it’s growing,” he continued, waving off the suggestion consumers might become fatigued with the strategy. “I think people are increasingly wanting new things, and we have new garments every day coming into H&M stores. And I think that is a strength. And we have the diversity…making it possible for people to dress their style.…We are very optimistic.”