Hennes & Mauritz in 2005: Managing Global Expansion

<< Previous

Excerpts

Erling Persson (Persson), the founder of H&M had begun his career delivering cheese, for his father, to Stockholm restaurants on a bicycle. During a visit to New York in 1947, Persson marveled at the success of retailers such as Macy's. Upon his return, he opened a women's clothing store called Hennes (hers, in Swedish) in Viiisteras, a small town in Sweden. The store's low prices proved a huge hit in Sweden, where retailing, as in the rest of Europe, was dominated by pricey department stores...

H&M believed in rapid growth, the norm being 10-15% increase in annual profits and opening several new stores every year. H&M believed in organic growth, financing expansion with its $1.1 billion cash reserves. It was quick to learn from its mistakes. In 1974, H&M decided to introduce shoes as part of its accessories. It soon realized that shoes were a different ball game altogether and involved stricter trade regulations and larger stocks. H&M abandoned the venture...

With annual sales of about $7.26 billion in 2004, H&M was much smaller than Gap Inc. (Gap Inc's sales topped $15 billion, and the Gap brand represented 46% of that) but bigger than its closest rival, Zara, which reported annual sales of just over $4 billion, nearly three-quarters of its parent Inditex's total sales.

H&M's market capitalization of $15 billion outstripped that of Gap Inc. and Zara International, its closest competitors. What set H&M apart from most competition was its rapid responsiveness...