H&M Continues to Shine

Business Week has a profile up on H&M, which is defying the retail sector's gloom. It continues to post solid sales numbers and hasn't slowed on expansion plans.

Indeed, as a purveyor of stylish clothing for reasonable prices, H&M sees the economic slowdown as an opportunity to expand. With its entry into Japan, the company will boast more than 1,600 stores in 30 countries, including China, where it launched in 2007. Over the next year, the company plans to increase the number of its stores by as much as 15%, focusing expansion on the U.S., Europe, and Japan.

As economic conditions worsen, H&M, which leases its store sites, is finding it easier to secure prime locations at better terms, especially in the U.S., where the company now has 153 stores, mainly on the East and West coasts. "We're getting much better deals now that we are a known player in the U.S." says H&M's head of investor relations, Nils Vinge. "Landlords are approaching us."

How is H&M managing to thrive in what many observers call the toughest trading conditions in decades? Credit a relentless focus on costs that extends from the company's merchandise to its business model. For starters, H&M's average sale prices are lower than those of its main rivals, Spain's Zara, owned by parent company Inditex, and the Gap. This will enable the Swedish chain to gain "market share in the current downturn, as consumers trade down in search of better value," says Kaupthing analyst Sandstedt.

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