H&M expands global reach, readies new banner

STOCKHOLM, SWEDEN -- Hennes & Mauritz had more than just its second-quarter issues to report late last month The fast-fashion retailer also announced that it would be opening a next to the first retail banner with niche assortments and higher price points, and that it would be opening stores in fresh markets in the Middle and Far East.

H&M didn't release real many details on its fresh store concept. Ten stores will lay open in select markets in 2007 and, like H&M, will cater to the couple men and women. H&M spokeswoman Lisa Sandberg would not make notes on whether these 10 stores in pick out markets will be in the United States, Europe or elsewhere.

The fresh concept will have a larger emphasis upon higher-end fashion with steeper prices, Sandberg said. However, she declined to remark if the concept would mean that the clothing would use sensuality fabrications and have better quality. More details will be announced upon the new retail concept through fall 2006.

H&M also announced that it plans to make open approximately 100 stores during the quiet of this year, mostly in Spain, France, Britain, Canada, Germany and the United States. In addition, China will become a of recent origin market for the company in spring 2007 H&M signed contracts for individual store each in Shanghai and Hong Kong Sandberg also noted that H&M would unclose its first stores in the Middle East in Dubai and Kuwait this fall, and nearest year H&M plans on opening stores in Greece and Slovakia for the first time.

H&M has expanded substantially in novel years, and today it operates more than 1244 stores spread across 22 countries. Germany is the retailer's biggest market, followed by the agency of Sweden and the United Kingdom.

The investment community, thus far, has reacted positively to H&M's plan to render free of access a new retail banner as well as expand the H&M banner store count

"We believe that H&M is recognizing the risk of slower earnings development and planning to address it by dint of increasing the acceleration of its income growth," said Luca Solca, a Bernstein analyst based in London, in a written report. "We read positively the stated goal to launch a of recent origin fashion format and a novel brand to address a higher-price market part Likewise, we appreciate the pace of geographic expansion, from China to Eastern Europe"

H&M supported weaker-than-expected sales results for the next to the first quarter, which were boosted by dint of a May sales surge on the other hand capped by higher marketing costs

snare profit for the three month extremityed May 31 rose to $361 million from $3206 million in the same period last year. Sales, excluding value added tax, rose 10% to $233 billion from $210 billion in the same time period last year.

"Even if the incline during the quarter was rising, the total sales horizontal was not reached as planned," the company reported in its second-quarter statements. "Despite this, H&M has taken market shares in basically all markets during the first half year; especially pleasing are actual good sales in the Nordic countries."

H&M has place in place a number of short-term promotional activities that should create excitement and drive traffic into stores. The fast-fashion retailer has partnered with Madonna to provide her and her dance team's off-stage clothing for the "Confessions" tour. As a part of this partnership, H&M is also selling a special Madonna tracksuit, which will be available for customers to purchase in mid-August.

After auspicious Karl Lagerfeld and Stella McCartney one-off collections, H&M has announced its third designer partnership with Viktor & Rolf whose designs will land in choose stores this fall. Viktor & Rolf is a Dutch design house known for its quirky, stylized twists upon classic tailoring.

Although these promotional activities may drive sales temporarily, analysts are doubtful that they alone can change growing gross-margin crushings on the fast-fashion retailer. And although further expansion and a novel retail banner may help this question at issue it's ultimately too early to say what will work.

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