H&M ON FIFTH: A FIRST LOOK
Byline: Anne D’Innocenzio
NEW YORK — Never mind that Hennes & Mauritz’s stock price plunged 31 percent last week, following news of an anticipated 12 percent profit dip in its first quarter and the resignation of its chief executive officer and longtime veteran, Fabian Mansson.
Such woes don’t seem to bother Stefan Persson, chairman of the Swedish retailer, which is hoping to stake a claim with its cheap, chic fashions on American soil.
The flagship, its first in the U.S., is set to open Friday at 640 Fifth Avenue, with a party for 800 people tonight.
Persson said he is confident in Mansson’s successor, Rolf Eriksen, a 15-year company veteran, to help spearhead the company’s future. As for Mansson, who had been with H&M since the early Nineties and was named ceo two years ago, Persson said that the departure was amicable.
“He approached me about leaving,” he said. “But I didn’t persuade him to stay.”
“Nothing has changed. Everything is exactly according to plan,” added Persson, interviewed Wednesday at the three-level 35,000-square-foot store, which was bustling with workmen and employees, all adding the finishing touches.
This opening is only the beginning for the $3.9 billion retailer, which operates 700 stores in 12 other countries and sells women’s, men’s and children’s clothing under 20 different labels.
The Fifth Avenue store has been promoted by teaser ads since last November and is the first of several planned for the New York metropolitan area. Sources anticipate the company will eventually have several hundred in the U.S.
On April 6, H&M will open a 35,000-square-foot store at Palisades Mall in West Nyack, N.Y., and a 14,000-square-foot-store is set to open April 13 at Garden State Plaza in Paramus, N.J., according to Persson. The company just signed a lease to open a 40,000-square-foot unit on West 34th Street, between Fifth and Sixth Avenues in the fall — joining such like-minded stores as the Spanish chain Zara, the Gap and Old Navy — and is also looking to open a store in the SoHo area. Within the next two years, H&M plans to open a unit at the former Alexander’s site on Lexington Avenue and 59th Street.
“This market has enormous possibilities,” said Persson.
He declined to specify a number of stores planned for the U.S., but he did say that he wants to first focus on the East Coast, targeting such cities as Washington and Boston.
Worldwide, the retailer’s overall expansion strategy calls for 100 new stores this year. Next week, H&M will be moving into Spain, with a store in Barcelona. It plans five more stores in that country within the next couple of months. H&M also plans to add stores in such existing markets as Belgium, Germany and England.
However, it is the U.S. that presents one of the biggest opportunities, and “the time to do it is now,” Persson said.
Even in a market of jaded New Yorkers, bombarded with endless shopping options from Bergdorf Goodman to Bloomingdale’s and the Gap to thrift stores, Persson is confident that H&M can compete.
“We are giving an extra edge when it comes to fashion. We are giving value for the money,” he said. “Americans like to make a good deal.”
The retailer, which has used such celebrities as Johnny Depp and Geena Davis in its advertising, is promoting its arrival with actress Chloe Sevigny, who appears in a $9.99 peasant top and several other looks on taxis and a slew of newspapers and teen magazines, according to Par Darj, who is heading up U.S. operations.
H&M’s prices are similar to those of Old Navy, the Gap’s lower-priced chain, but H&M offers a more sophisticated collection. This season, the focus is on hippie chic, with the Fifth Avenue store showcasing lots of crocheted looks, paisley print skirts and peasant tops. There are items like $109 leather pants, $25 crocheted skirts and $25 suede shirts. H&M offers a range of labels from its Hennes Collection, which features the most sophisticated items, like suede shirts, to its fast-forward junior label called Impulse.
LOGG is the retailer’s key fashion basics collection, featuring sporty jackets and T-shirts.
The merchandise is designed by a team of 60 designers, all headed by chief designer Margareta Van Den Bosch.
Persson pointed out that with the globalization of fashion, all of H&M’s stores carry the same merchandise, and he said that its approach to the U.S. won’t be any different.
“Everyone listens to the same type of music, watches the same films,” he said.
The Fifth Avenue store features all the categories except for children’s wear and maternity clothes. Its Palisades store will carry those two categories in addition to all the others. Other H&M stores carry a combination of labels, thereby offering the retailer flexibility in choosing real estate. Stores range from 5,000 square feet to 40,000 square feet.
The Fifth Avenue unit, according to Darj, represents a new breed of prototypes and features more light and more merchandising displays.
Junior merchandise is located on the first level, while men’s is on the second.
The third floor showcases women’s contemporary, accessories and cosmetics.
H&M has enjoyed a long honeymoon, posting average sales increases of about 21 percent over the last 10 years.
The company has received kudos from financial and fashion watchdogs for its sharp prices and its ability to jump on a hot item and get it into the stores within a couple of weeks.
H&M works with 1,600 suppliers, primarily in Europe and Asia. To monitor manufacturing around the world, the company operates 15 production offices in Europe and Asia. These facilities keep a close eye on the purchasing market and perform quality checks.
Its last fiscal year, ended Nov. 9, was another barn-burner. The retailer’s sales increased by 24 percent to $3.9 billion. Profits were up 37 percent to $560 million.
Persson dismissed the recent punishment of H&M’s stock as merely a blip. The company’s stock price last week dropped 31 percent to $26.83 on the Stockholm Stock Exchange. Dollar figures are converted from the Swedish krona at the current exchange rate.
The shares closed on Wednesday down 6.7 percent at $25.
“I was very satisfied with our profits,” said Persson, referring to its first quarter. He noted that the 12 percent anticipated dip reflects currency fluctuations and the exorbitant costs associated with opening stores in the U.S. and Spain. Excluding those elements, he noted that profits were actually up 5 percent. Final first-quarter figures for H&M will be reported April 13.