RPT-H&M sees 'great potential' for African clothing production-paper

Wed Jan 15, 2014 11:01am EST

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STOCKHOLM Jan 15 (Reuters) - Hennes & Mauritz said on Wednesday it saw good opportunities for producing clothing in sub-Saharan Africa, a move which would reduce its reliance on countries like Bangladesh where election unrest has disrupted the garment sector.

H&M has already started producing clothes on a small scale on the continent and Africa would complement the company's production in Bangladesh, China and Cambodia, Hennes & Mauritz CEO Karl-Johan Persson told Swedish business daily Dagens Industri.

"I think that there is great potential in sub-Saharan Africa when it comes to production," Persson told the paper. "We have started producing on a small scale in Ethiopia and we will see how it goes. It seems very interesting."

H&M sources most of its garments from factories in Asia, particularly Bangladesh, where a factory collapse last year that killed more than 1,100 people put pressure on big brands to improve working conditions for those making clothes for the West.

Election-related violence has also disrupted Bangladesh's garment industry, the world's second biggest after China, while a shutdown by striking garment workers in Cambodia, another big supplier, has further squeezed global fashion firms.

Arch rival Inditex relies less on developing nations to produce its clothes than H&M.

According to Dagens Industri, H&M plans to undertake a survey of production opportunities in Africa this spring, for instance in South Africa where it plans to open its first store in 2015.

"There won't be dramatic changes in the distribution of production in the short term, but there may be bigger changes in the long term. It depends on how prices, quality and lead time develop," Persson said.

He also saw sales opportunities for the firm in African markets in addition to Morocco and Egypt, where it already has stores.

"Africa is a continent where many countries are growing very fast, where there is a growing middle class and in time a huge potential for sales," he said.

Separately on Wednesday, H&M reported brisk sales for December, the first month of its fiscal first quarter.

Total sales were up 10 percent in the month, giving the H&M share price a 2 percent lift and making it the biggest gainer on the day on Stockholm's blue-chip index.

The company said it would no longer report comparable sales for stores open at least a year, saying total sales were more relevant. (Reporting by Mia Shanley; Editing by Greg Mahlich)

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