As a victualler of stylish clothing at reasonable prices, retail chain H&M looks at the economic slowdown as an suitable to expand

by Kerry Capell

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With the credit crunch in filled depend, retailers around the creation are slashing prices and shuttering shops. But Sweden’s Hennes & Mauritz (HMB.ST), a pioneer of cheap but chic make, is managing to buck the trend: opening stores, entering new markets, and adding new brands. "Our strategy is based on the concept of fashion and quality at the best estimation," says H&M Chief Executive Rolf Eriksen. "It helps us stay balanced even during economic downturns."

Defying tough times, H&M devise be initiated one of the world’s most competitive fashion markets with the opening of its first store in Japan on Sept. 13. The initial exit, in Tokyo’s Ginza shopping region, disposition be followed by a second set by in Harajuku on Nov. 8. At the same time, H&M will also launch its latest high-profile design collaboration with Japanese designer Rei Kawakubo, the caster of cutting-edge fashion thunderbolt Comme des Garçons. A third Japanese store in Shibuya is expected to open next fall.

The fashion confine’s arrival is bound to thrill members of its Japanese H&M fan club, who already number 20,000. "With H&M’s track record in entering new countries, the strong interest in way in Japan, and the existing H&M fan defray by shares, H&M has a good chance of doing well in that place," says Erik Sandstedt, retail analyst at Kaupthing (KAUP.ST) the money-lender’s in Stockholm.

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

As economic conditions worsen, H&M, which leases its store sites, is finding it easier to negligent prime locations at better terms, especially in the U.S., to what the company now has 153 stores, mainly on the East and West coasts. "We’re acquirement 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 intriguing to make improvement in what many observers call the toughest trading conditions in decades? Credit a uncompassionate focus adhering costs that extends from the company’s merchandise to its business model. For starters, H&M’s average sale prices are sink than those of its main rivals, Spain’s Zara, owned by parent company Inditex (ITX.F), and the Gap (GPS). This will qualify the Swedish chain to secure "market share in the current downturn, as consumers profession down in make inquiry of better appreciate," says Kaupthing analyst Sandstedt.

H&M’s biggest advantage is its business gauge. A team of 100 in-house designers works with buyers to lay open the clothing, which is then outsourced to a network of 700 suppliers, more than two-thirds of which are based in low-cost Asian countries. Not owning any factories, "H&M can be more tractable than many other retailers in clouded its costs," says Raphaël Moreau, deal out in small portions company analyst for emporium research firm Euromonitor International in London.