What’s in H&M’s future? A concept store in Sweden could offer the answer
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What’s in H&M’s future? A concept store in Sweden could offer the answer

H&M is in recovery mode after a turbulent year that’s seen its share price suffer. The cause of its problems boils down to a familiar story: once the disrupter, H&M failed to keep up with its competitors and fell behind. In this specific case, the company – which was once one of the pioneers of fast fashion – started losing out to agile online operators like ASOS and Boohoo. Over the last month, however, H&M has shown a revitalisation of its business – and its share price has soared in response. But what’s next for the iconic high street brand? A concept store in Sweden may have the answers.

H&M’s share price has surged over the past 30 days by an impressive 32%

graph 0410 hm

SOURCE: Yahoo Finance

Looking to the future, H&M’s vision is minimalist, curated, and comes with a higher price tag. That, at least, is what its Swedish concept store – opened last November – conveys. It’s a sharp turnaround from H&M’s traditional high street presence, which is none of those things. And, also unlike H&M’s current offering, there’s not all that much clothing. What is there is carefully chosen, and shares its space with yoga classes, croissants, and coffee.

In going up-market, H&M is borrowing a strategy from successful sister brand Cos (which may be a viable model for it going forward). It’s worth noting just how successful Cos has been: in its first half year report for 2017, H&M’s CEO Karl-Johan Persson stated that Cos’ profitability was “in-line” with H&M’s – despite having 95% fewer stores.

But H&M is doing more than copying Cos – the brand wants to do something new. Anna Tilberg, head of Laboratory (H&M’s “innovation think tank”) described the onus of the concept store as follows: “After talking to the customers, we’ve been wanting to create a warmer and more personal feeling.” The result is a place that people want to be – and, if H&M’s experiments with new, millennial facing brands (like Nyden) are successful, a place where people want to spend.

Disclosure

Dominion holds H&M in its Global Trends Luxury Fund.


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