Analysis: H&M could do more to catch a lift from designer collaborations

Mon Dec 16, 2013 9:09am EST
 
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By Emma Thomasson

BERLIN (Reuters) - Designer collaborations are helping Hennes & Mauritz (HMb.ST: Quote) rise above a reputation for cheap chic, but the world's second-biggest clothing retailer could do more to entrench that upmarket lift and defend its shrinking margins.

Fired up by blanket billboard advertising and a social media blitz, shoppers stormed H&M stores and websites on November 14 for the launch of a limited-edition collection by Parisian Isabel Marant, famed for her edgy bohemian designs.

H&M needs that buzz to help gross margins, which have fallen below 59 percent from almost 63 percent in 2010, while mid-market rival Inditex (ITX.MC: Quote) has improved theirs to about 60 percent from 57 percent.

While H&M declined to comment on Marant's impact on figures, sales in stores open at least a year jumped by a bigger-than-expected 10 percent in November, which H&M attributed to cold weather boosting purchases of winter clothing.

The Marant range was H&M's 13th guest collection since its first by Karl Lagerfeld in 2004, with later cameos from Stella McCartney, Jimmy Choo, Roberto Cavalli and Comme des Garcons.

That contrasts with H&M's usual focus on low-priced basics, which puts it in the crosshairs of discounters like the Primark chain of Associated British Foods (ABF.L: Quote), which has expanded fast during the downturn in H&M's European heartland.

The Marant range, on sale at around 250 of H&M's 3,000 stores, retailed at a fraction of the cost of the designer's own line, but double or triple the prices of H&M's regular range.

By lunchtime, the H&M store on Berlin's Friedrichstrasse had sold out of Marant's chunky cardigans for 129 euros, tasseled boots for 199 euros and leather trousers for 249 euros. The H&M website was swamped, placing shoppers in a virtual queue. Many items were promptly selling for inflated prices on eBay.   Continued...

 
A woman walks past a H&M advertisement in Riga September 25, 2013. REUTERS/Ints Kalnins