Hennes & Mauritz AB (STO:HM-B), the Swedish retailer known to many as H&M, is on a quest to expand globally, with India and accessories as two key components of its expansion plan.
The world’s second-largest fashion retailer, known for its discounted fashion, intends to spend $130 million to open 50 stores in India, and it will be testing the troubled European market’s reactions to higher-priced accessories with a new retail chain.
"[India] is a very interesting market with a huge population and a growing middle class," Fredrik Olsson, who manages global expansion operations for the company, told Reuters. The company says it will invest $130 million to open 50 stores in India, though it has not said when it expects its first flag to be planted in the subcontinent.
Last month, the company opened its first H&M store in Chile, and store openings in Lithuania, Estonia and Serbia are planned for fall. More store openings are planned for the U.S. and China, as well, and U.S. customers will get to shop H&M online for the first time.
The Stockholm-based company, which reported $535 million in operating profit in the quarter ended Feb. 28, has no debt, but it’s heavily dependent on the troubled European market and is seeking a larger presence in emerging markets, including China, as well as a larger U.S. footprint. It has nearly 2,800 stores in 49 countries, but about 80 percent of its revenue comes from Western Europe, according to its last annual report.
H&M and its primary competitor, Spain’s Industria de Diseno Textil SA (Inditex), which owns the Zara brand, the world’s largest clothing-only retailer, have managed to weather the last global downturn despite their heavy European exposure.
But Zara is years ahead of H&M in expanding into emerging markets; its Spanish roots allowed it to penetrate the Latin America market decades ago, and about 20 percent of its revenue is based in Asia. Inditex has more than twice as many stores as H&M in 86 countries.
H&M has already submitted its application to open stores in India, Olsson said. Last year New Delhi opened the gates to foreign direct investment in retail, allowing the country’s states to decide whether or not to allow multinationals to set up shop directly in cities with populations greater than 100,000.
Meanwhile, H&M is also testing Europeans’ tolerance for higher-end accessory items with a new chain called & Other Stories that sells upscale items like scarves and makeup, which cost less than high-end fashion items like shoes and suits.
“& Other Stories is a totally different concept, a totally different brand, with its own creative team and creative expression,” Pernilla Wohlfahrt, who manages the company’s upstart operations, told Bloomberg. “So it was natural and essential for us to put it in a different store.” The company is opening seven & Other Stories outlets in Western Europe this spring after the launch in March of its first store in London.