The company opened 90 new stores during the second quarter

The company opened 90 new stores during the second quarter

Swedish fashion retailer Hennes & Maurtiz (H&M) remains committed to sourcing in Bangladesh despite a series of apparel factory disasters in the country over recent months. 

"Sourcing is something we always work on and Bangladesh is one important country," investor relations manager Nils Vinge told analysts yesterday (19 June).

"China is still the most important sourcing country and we always look at new markets, but it's not that we are going from one country to the other.

"There are so many factors in sourcing [and while] costs are important, it's also [about] fashion, quality, lead times and sustainability," he said.

The company has seen an increase in salaries in China, but also in Bangladesh, a country where Vinge stressed it "actively contributes" to improving worker salaries to ensure staff can live on what they're paid. 

Global expansion
The retailer opened 90 new stores during the second quarter, taking its total number of stores to 2,908 in 49 markets.

Its first store in Chile, which opened earlier this year, is now one of the best-selling stores in the group. "We see great potential for H&M to grow in this part of the world and we are looking at other markets," said Vinge.

"We definitely see big potential in Latin America, and we're very happy with the entrance in both Mexico and Chile. Most countries in Latin America have difficult import barriers that we are looking into."

When asked whether the group will have to source locally in this region, Vinge added: "We are open, we are very pragmatic and we have sourced in Latin America and Mexico before, so we don't rule out anything.

"We have developed a process to supply the right mix to these markets so they can find seasonable products and the latest trends," he explained.

H&M will open in Estonia, Lithuania, Serbia and via a franchise in Indonesia and has signed for its first store in Australia, which will open in Melbourne next year.

The retailer is also expanding its e-commerce operations by launching an online store for the US in August, and intends to add more markets next year.

However, Vinge said: "We still have a huge potential to grow in Europe and that's one of the strengths of the company and the business model - that we can still expand in mature markets.

"We have a business model that works in big cities, smaller cities and medium-sized cities as well as shopping malls, so there is a lot of potential for us to grow for many years in Europe. On top of that we can grow in new markets - in the US and Asia."

The comments came as the retailer blamed poor weather and negative currency translation effects for an 11% decline in second-quarter profit to SEK4.66bn (US$727.2m).

Strong sales in Asia, particularly China, Hong Kong and Japan, were not enough to offset an overall decline in group sales. The company said this was mainly due to the tough macroeconomic climate, as well as unfavourable weather in March and much of April.

Although investments in IT, online and its & Other Stories fashion brand have not yet generated increases in revenue, the company views them as "wise and necessary" to build an even stronger business.

"I think fashion apparel is one of the most competitive industries in the world and that's why we can never sit down and become complacent. We have to always be on our toes and try to improve things, and that's why continuous improvements is one very important value of the company," Vinge said.

"All in all, it remains a very tough and competitive market and we can never relax, but we see a lot of opportunities and we have great confidence in what we do."