H&M Expansion to Emerging Markets

In addition to Georgia, H & M will also open stores in Colombia, Iceland and Kazakhstan next year. The Swedish retailer will also continue the rapid deployment of its online stores, currently available in 35 international markets.

At the moment, H&M has not yet revealed additional details about its next store openings in these emerging markets, but we will have to follow with interest the evolution of this investment in physical stores that the textile giant is coordinating with its positioning in online shops.

Coordination of physical store and online commerce.
The company is convinced that, although it may have been slow at the beginning of its online expansion, it has now reached its rivals and also presents a good coordination between both formats of stores, to avoid cannibalization between such distribution systems. In this way, H&M envisages an increase in the flexibility of the leasing terms of their physical locations, allowing for possible short-term closures in the event that consumer habits change radically towards electronic platforms.

This expansion demonstrates how H&M positions itself as a leading international retailer, aiming to offer the best value for money in sustainable fashion. H&M has previously set a growth target to increase its current number of stores by 10 to 15 percent per year. For the full year through 2016, the H & M group intends to open a net addition of 425 stores. Today, the H & M Group has more than 4,200 stores in 64 markets.

A new store in St. Petersburg.
Thus, on Thursday, November 17, H & M will open a new store in Russia, specifically in St. Petersburg, at the «Ohta-Mall» complex. The new store will open its doors to customers at 12:00. In honor of the opening of the retailer will hold a traditional event: the first 50 visitors will receive a gift card of 1000 rubles (15 EUR), and the next 100 visitors of 500 rubles. In addition, H & M has launched a special campaign on the popular social network vk.com, (Russian Facebook) whose details can be found here. Recall that last month the retailer opened its 100th shop in Russia, in Moscow´s «Mary» Trade Center.

Slight improvement in sales. Fall in profitability.
H&M, publishes its annual financial reports  in mid-December, as its financial year closes on November 30. The outlook for profitability is not too optimistic as it has been suffering in recent quarters falling in this benefit, explained in part by currency losses due to the growing strength of the USD. In spite of having dropped the net profit one in its first three quarters, the multinational intends to continue investing, as we have seen, both in stores in traditional format and opening markets for its electronic commerce.

H&M, the world’s second largest apparel retailer behind Inditex, finished its third fiscal quarter with a net profit (up to August 31) of SEK 12.7 billion (1.25 billion euros), a 17 % Less than the 15.61 billion crowns of the same period of the previous year.

The adverse effect of  a strong dollar.
The company explains that a strong dollar, the main currency used to buy apparel from suppliers in Asia, increased the costs of purchasing materials. H&M was also pressured by a higher volume of winter clothing that remained in stores as a result of the unusually warm weather, resulting in an additional stock not expected.

Sales in the period rose slightly (by 5.5%) to 139.3 billion crowns (excluding VAT), about 14 billion euros. The financial parameters of H&M, which indicates its sales, obviously in Swedish kronor, with VAT included in the income statement and close exercise in November instead of December.

H&M hopes for a more favorable foreign exchange environment but this has not yet taken place, as the strengthening of the dollar is palpable, especially after the election of Donald Trump as president of the United States. We know that currencies, at least the most important, tend to balance. But custom does not guarantee similar behavior in the future.

Disclosure: The Luxonomist is not responsible for the views expressed in the article. The text has been written freely expressing their own ideas, without receiving any compensation. The author has no business relationship with any of the companies whose shares are listed in this article.