Teen retailers American Eagle (NYSE:AEO), Abercrombie & Fitch (NYSE:ANF), and Aeropostale (NYSE:ARO) might get a little more scared this back to school shopping season. The popular retailers have fared well with the heavy shopping teen market and seen online presences increase sales. European retailer Hennes & Mauritz (OTCPK:HMRZF) is opening more stores in the United States and launching online sales in America for the first time this August.
Hennes & Mauritz is the second largest fashion retailer in the world. The company, who was previously number one, was overtaken by Inditex, owner of the popular Zara brand in 2006. Part of the reason for the sales boost was Inditex's willingness to allow internet sales. Inditex has internet sales available in 23 markets, versus the current eight for Hennes & Mauritz.
Hennes & Mauritz has over 2800 locations in 49 countries. Inditex has over 6000 stores in 86 countries. More importantly, Inditex is better diversified by region and growing steadily in Asia, where it gets 20% of its sales. Hennes & Mauritz on the other hand gets 80% of its sales from a weak European market and only 8% from growing Asian regions.
Along with its popular namesake brand, Hennes & Mauritz is also expanding its store base globally with new concept stores:
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Here is a look at Hennes & Mauritz's global base of stores, at the end of May (year of first store):
· Asia Pacific - China/Hong Kong (2007): 150, Japan (2008): 29, Malaysia (2012): 3, Singapore (2011): 2, South Korea (2010): 16, Thailand (2012): 98
· Europe - Austria (1994): 69, Belgium (1992): 72, Bulgaria (2012): 10, Croatia (2011): 12, Czech Republic (2003): 35, Denmark (1967): 95, Estonia (2013): 3, Finland (1997): 54, France (1998): 192, Germany (1980): 410, Greece (2007): 26, Hungary (2005): 29, Ireland (2005): 17, Italy (2003): 108, Latvia (2012): 2, Luxembourg (1996): 10, Netherlands (1989): 128, Norway (1964): 112, Poland (2003): 112, Portugal (2003): 26, Romania (2011): 25, Russia (2009): 43, Slovakia (2007): 13, Slovenia (2004): 12, Spain (2000): 154, Sweden (1997): 179, Switzerland (1978): 84, Turkey (2010): 16, United Kingdom (1976): 233
· Middle East/Africa - Bahrain, Egypt, Israel, Jordan, Kuwait, Lebanon, Morocco, Oman, Qatar, Saudi Arabia, United Arab Emirates (2008): Total 98 franchised stores in region
· North America - Canada (2004): 62, Mexico (2010): 1, United States (2000): 268
The popular retailer has almost 300 stores in the United States. The United States was the company's number two highest revenue country in 2012, behind Germany. Despite this strong base number, Hennes & Mauritz has no stores in 18 states. With no online sales, these states' teens are shut out from buying popular H&M clothing. Chief executive officer Karl-Johan Persson had this to say of the United States, "There is great potential in the growing online market. We are looking forward to launching our online sales in the US in August. In parallel, we are continuing our work on the global roll-out of H&M's online store, with the aim of adding several new online countries during 2014."
There is built up demand for Hennes & Mauritz products online in the United States. The company's website continues to rank as one of the most searched fashion retailers on Google, despite no items for sale on the site. Several Facebook petitions even surfaced to persuade the retailer to allow online sales in the states. Since launching its first physical store in the US in 2000, the brand has become synonymous with fashion and affordable.
The launch of online sales in the United States shouldn't come as a huge surprise to anyone who has followed the popular retailer. The company has attempted to launch online sales in America twice, but both times backed off. The main focus for expansion remains the United States and Chinese markets.
Expansion in the United States is one of many exciting growth stories for the retailer. Hennes & Mauritz is spending $130 million to add 50 more stores in India, to take advantage of a growing middle class. In 2012, Hennes & Mauritz opened its first store in South America in Chile. Brazil is listed as a coming-soon market with plans to explore several locations in the growing country. The company will also expand to Australia within the next 12 months. Plans call for 10 to 15% store expansion every year.
Shares of Hennes & Mauritz trade on the OMX stock exchange in the Nordic region. Shares also trade in the United States as a pink sheet stock. Shares have relatively low volume, but are approaching new 52 week highs.
In June, Hennes & Mauritz reported strong sales. The company saw total sales increase 13%. Stores at locations open more than a year increased 3%. Total sales were helped by a new base of 2926 stores, versus last year's total of 2596. Through the first half of the year, Hennes & Mauritz has seen total sales increase 5%, despite negative 4% same store sales. The European economy hurt same store sales in the first quarter, as did foreign currency impacts.
Hennes & Mauritz, known for its phrase "fashion and quality at the best price", is taking on the competitive United States retail segment. The company has a strong base with 300 stores, but should see tremendous growth in the region with online sales. States that have no locations, or states with locations only in the largest cities, will see customers getting online to buy merchandise for the first time, or more often than normal.
*Information from Hennes & Mauritz investor relations page*
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.