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H&M speeds up expansion as profits fall

Wednesday, March 20, 2013 - 01:59

March 21 - Profits at Hennes & Mauritz are down more than expected just a week after rival Inditex - the owner of Zara - reported a massive rise. Hayley Platt looks at where the world's second biggest fashion retailer is going wrong.

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A new store but the same old story. Slack sales at H&M, dragged down by the euro zone debt crisis. The Swedish fashion chain is trying a new strategy with an accessories business called "& Other Stories". It only opened last month in London, Paris and Copenhagen with more planned. It's too early to tell if it will turn around the fortunes of the world's second largest fashion retailer. Pretax profits at H&M fell 12% in the first quarter to $500m And sales only rose by 3 percent. Conlumino's Neil Saunders. SOUNDBITE: Neil Saunders, Conlumino, saying (English): "It's operating in a very saturated component of the market. It's value fashion, it's fast fashion. We've seen a lot of other players enter that market and H&M have started to feel a little bit stale. There's not an awful lot new going on in store in terms of products and stories and I think that is hurting their growth prospects." H&M has spectacularly failed to keep pace with rival Inditex, which owns Zara. It recently reported double digit growth, thanks to expanding in markets like China to make up for falls in Europe. H&M has also been investing in its long-term future. Developing an online presence and trying to broaden its customer base. SOUNDBITE: Neil Saunders, Conlumino, saying (English): "The problem is that market is already very crowded. You have accessories shops, you have department stores, you have the grocers that are now in on that act and of course clothing stores have all developed their own accessories, so it is a very crowed and competitive market. So the key with H&M in this area is what are they bringing to this area that is new, what are they bringing that is different." H&M is still expanding. It already has almost 2,800 stores in 48 countries and has plans to open a further 350 this year. It's also venturing into Australia next year.

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H&M speeds up expansion as profits fall

Wednesday, March 20, 2013 - 01:59