H&M Group continues to shop in the global market
According to the World Apparel and Footwear Network, H&M (STO: HM) recently released its earnings report for the first nine months of 2017 as of August 31. According to the report, H&M Group's sales rose 7% year-on-year to 173 billion Swedish kronor, or about $21.2 billion, lower than expected. Profit before tax was SEK 15.9 billion, or about USD 1.95 billion, with a gross margin of 53.6%.
H&M Group has not stopped the pace of opening stores in the global market. In the first nine months of 2017, the Group successfully opened its first stores in Kazakhstan, Colombia, Iceland and Vietnam. Georgia's stores in the US will open this fall, and the markets that are planned to open in 2018 are Uruguay and Ukraine.
During the first nine months of this year, the group opened 269 new stores, closed 67 stores, and added 202 new stores. As of August 31, 2017, the H&M Group has a total of 4,553 stores worldwide, compared with 4,135 in the same period last year, of which 209 are operated by franchise partners.
In terms of the number of stores, the European and American markets opened 40 new stores in the first nine months of this year. The Asia-Pacific region opened 109 new stores in the first nine months of this year. The Americas opened 18 new stores in the first nine months of this year. According to the financial report, the group will open online stores in the Philippines and Cyprus markets in 2017. In addition to the six online markets that have been opened in 2017, the group will continue to capture online markets in India and other places in 2018. The ultimate goal is H&M's e-commerce services are available in all market-opening markets and in the wider market.
Excessive inventory has become one of H&M's problems, so the group carried out promotional activities in the third quarter, but this has dragged down the growth rate of performance to some extent. In the three months ended August 31, H&M Group's sales rose 5% year-on-year to 59.38 billion kronor, or $7.42 billion.
In the main market China, the H&M situation is still inevitable. This month, the H&M store at the entrance to the north end of Xidan Joy City in Beijing was stunned by the news that it was one of H&M's first stores in Beijing. The three-storey gold shop from the negative one to the second floor was emptied.
According to informed sources, this is not a temporary store rectification, but will be officially closed to close the store, or will be replaced by the Victoria flagship store. Moreover, according to the custom of signing for more than ten years when entering China, the lease has not expired, which means that Joy City is willing to pay the liquidated damages, and H&M will give up the shop.
Some analysts believe that H&M's scenery in China from the opening of the store to the current withdrawal of the store reflects the golden age of fast fashion in China. However, compared to the situation in ZARA, such a conclusion may be premature. According to the fashion headline network, in the first quarter of this year, ZARA's sales growth in the world is twice that of H&M. More reasons may be sought from H&M itself.
Judging from the various occasions of the group, including the statement of the first nine months of the financial report, H&M's strategy is still actively expanding. The group's tentacles will always be ready to reach new markets. The H&M brand official website has entered six new markets this spring, namely Turkey, Taiwan, Hong Kong, Macau, Singapore and Malaysia. It is currently facing 41 countries and regions around the world. open.
In terms of physical retail, Group CEO Karl-Johan Persson said after the release of the earnings report that H&M Group will maintain a positive expansion attitude. In 2017, it will open about 500 new stores while closing 100 poorly performing stores. The first nine months of the financial report also confirmed the group's determination in physical expansion. However, H&M's response to the slowdown in sales growth and the reduction in passenger traffic is less positive. H&M seems to turn a blind eye to the problems of not being fast enough, not being young enough, and not being too fashionable, which directly affects consumer decision-making.
In fact, the H&M Group has realized the current situation. Group CEO Karl-Johan Persson said in a statement that the fashion retail industry is growing and is in a period of widespread and rapid change, which is the result of digitization. As new players enter the market, the competitive landscape is being redefined, customer behavior and expectations are changing, and the share of online sales is growing. However, he acknowledged that H&M's growing online sales did not fully compensate for the decline in passenger traffic in several of our key markets, resulting in sales that did not meet expectations, and the Group was not satisfied.
Therefore, H&M said in its latest financial report that the future development of the Group will focus on digitalization, and it is expected that the annual online sales growth will be at least 25% in the future. Now, the H&M Group is going to put more effort into digitization. But people are curious as to whether the group has proposed a better product strategy?
From the point of view of the product itself, the reason why H&M's situation is getting more and more embarrassing is that the quality is better than that of Uniqlo. The speed is better than that of fashion e-commerce. Compared with Zara, there is no distinguishing feature. The law of fast fashion is the pursuit of the fastest. Under the pressure of Zara's madness, when a fast fashion brand can't do it the fastest, it may have to consider another direction.
There are indications that the H&M Group's overall strategy is undergoing subtle changes that seem to shift to high-end lifestyle brands. First of all, from the perspective of brand layout, the Group's COS has become a new growth driver of H&M Group, with excellent design and quality. For the COS brand, the H&M Group still has great expectations. It is expected that the brand's sales this year will reach 10 billion Swedish kronor of about 1.17 billion US dollars, which has the potential to become the second largest brand of the group except H&M.
The COS brand opened its first flagship store in Regent Street, London, UK in March 2007. In just a few short years, it quickly caused concern and consumption boom in the fashion industry. According to the fashion headline data, the brand is expanding on the scale of 22 new stores every year. According to relevant data, sales of COS have grown rapidly. From the year of 2009 to 2014, COS sales increased from $132 million to $625 million, nearly five times. As a high-priced medium-sized minimalist brand of H&M Group, COS has amazing profitability. According to previous data, the daily profit of COS London single store has exceeded that of all H&M stores in the same city.
This year, H&M launched a new brand, ARKET, which is considered to be the second COS. On the 25th of last month, ARKET's new store in London just opened. The fashion headline network earlier reported in detail the H&M's intention to "recreate" a COS. This new brand is completely different from the fast fashion H&M. It is based on the Nordic design style, with solid color tones, comfortable fabrics and neat cuts. The store not only sells men's and women's ready-to-wear, children's wear and home products, but also sells selected items from other brands in the ARKET store, and has a Nordic-style café for consumers to enjoy. H&M has high hopes for this new brand and has been preparing for this for nearly two years.
Launching a brand with similar COS is nothing more than hoping to copy and expand the latter's success model. In other words, the group will increasingly be deployed in the boutique lifestyle to reduce dependence on fast fashion brands. Diluting the positive competition with ZARA.
People from this month's H&M recently announced the joint collaboration of designers can also smell different atmospheres. The group chose the designer to be Erdem, which is not so high-profile. The latter is famous for its prints and dresses, avoiding the best-selling street fashion styles. This month, the group also announced that it will launch the H&M Studio 2017 autumn and winter cooperation series with the Paris buyer's store Colette. The collaboration includes a total of 9 pieces, which are based on Colette's iconic blue color, with special color combinations, hand-painted graffiti and raw edges. Jacquard and so on. H&M's selection of partners has become more and more cautious, and it is more inclined to select partners with higher fashion styles than high-profile ones.
In the Chinese market, which is increasingly valued by fast fashion, as the middle class continues to expand, they are no longer satisfied with the short-lived pleasure brought about by cheap and fast fashion. They begin to “break away†too much consumer goods, instead they choose “ Small and refined, there is a high pursuit of quality of life. The success of COS is in line with the needs of this expanding middle class. Although the price of H&M is higher than that of fast fashion, the sales growth rate is very impressive, which proves that the market space of the middle class has not been fully explored.
This is why H&M, which occupies the third floor of Xidan Joy City, has been withdrawn from the store, and the COS of Sanlitun Taikoo Li has been a high passenger flow all year round. In a large number of second- and third-tier cities, H&M stores, because of the rapid expansion of the extensive display decoration, you can hardly feel the fast fashion group's commitment to environmental protection and lifestyle.
More precisely, the biggest difference between H&M Group and other fast-moving fashion groups is that it is not widely recognized by consumers. From the perspective of corporate social responsibility, H&M is indeed respected by the industry. The problem is that the natural contradiction between fast fashion and sustainable development makes it harder for H&M to promote sustainable production. If the group is more consistent with such a brand of COS and ARKET, it may be more effective.
With the increasing awareness of Chinese consumers, many new middle-class consumers are very willing to pay for quality and socially responsible products. Therefore, some analysts suggest that for fast fashion H&M, brands need more distinctive and efficient stores. At the same time, the group should be aware that although H&M has encountered ceilings in China, its &Other Stories and ARKET, which have not yet entered China, are the potential in the Chinese market.
H&M may need a clearer product strategy. After the earnings announcement, H&M shares fell 5.13% to 211 SEK per share. Since its inception in 2017, its share price has fallen by about 18%, and its current market value is 308.2 billion Swedish kronor, or about 252.4 billion yuan.
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