H&M’s Ambitious Expansion Plans

Despite reporting quarterly losses, it seems H&M is bent on getting bigger.

The Sweden-based fast-fashion mega firm claims that currency headwinds pushed their profitability losses to the 30 percent range in Q1, and that undaunted they will continue to aggressively forge forward in opening online and physical stores. According to the firm’s CEO Karl-Johan Persson, H&M is “very profitable.”

Persson is also confident in his firm’s future as a physical and digital brand, believing the two “locations” for commerce will ultimately complement each other. It is not an uncontroversial view among analysts, some of whom believe H&M’s real world focus is a bit off the mark.

“Given the growth in online sales we would expect H&M to prioritize eCommerce investment over stores,” said Richard Chamberlain, an analyst at RBC Capital Markets.

Persson, however, took a different, longer view — and notes his expectation that the choice will not be an either/or, but a both as online and physical stores increasingly integrate.

“Lines will be blurry,” he noted

H&M has pushed up its online capability in recent times, with online shopping officially online in more European countries like Ireland and Croatia, and plans to expand into Japan, Greece, Canada and South Korea digitally in the near future. All in, the plan is to have 34 eCommerce markets up and running by the end of 2016, about half the countries H&M has a physical presence in.

The chain also has plans to expand its 3,970 stores with an additional 425 openings by November of this year.

The drop in profit last quarter — brought on by bad weather and a strong dollar, according to the firm’s top brass — is internally forecasted to have been neutralized by the end of Q4.

“Over the full year it has a negative effect, but it’s heading in the right direction,” Persson said.