H&M Hopes Versace Glamour Will Boost Ailing Sales
21 Juin 2011 - 1:29PM
Dow Jones News
Cheap chic retailer Hennes & Mauritz (HM-B.SK) is hoping its
Autumn collaboration with Donatella Versace will boost its profile
on the investor catwalk and the Italian haute couture designer's
glamour may rub off on its ailing share price.
The Swedish fashion giant, which last week disappointed the
market with a lower than expected rise in second quarter sales,
said Tuesday the Versace-designed collection will hit its stores in
November, giving sales a much-needed boost ahead of the key
Christmas period.
The collection, which is the latest in a line of designer
partnerships for the high street clothing chain, will likely give
sales a short, sharp boost in November, but the long-term impact
will be minimal given such collections tend to be limited and sell
out in a matter of days.
The main benefit however will be the boost to the company's
image as it has been struggling in recent months to persuade
consumers to part with their cash, despite maintaining low prices
at the expense of margins as raw material costs have spiralled.
Weaker-than-expected second quarter sales last week raised
concerns that lower sales combined with higher cotton costs will
hit gross margins hard, and the company's share price has fallen
nearly 9% in the last month.
"Versace is one of the most important brands of recent times,
and their collection for H&M will be glamorous and flamboyant -
everything Versace stands for," said Margareta van den Bosch,
creative advisor at H&M.
The Stockholm-based company said the collection will include
ranges for women, men and selected pieces for the home. In
addition, Donatella Versace has designed a pre-spring collection
for H&M which will be exclusively available in countries with
H&M on-line sales from Jan. 19, 2012.
H&M started its designer collections with Karl Lagerfeld in
2004 and collaborations since have included Stella McCartney,
Roberto Cavalli, Comme des Garcons, Jimmy Choo and, most recently,
Lanvin.
Societe Generale analyst Anne Critchlow said all those
collections had been a success, although to varying degrees, and
she expects the latest collaboration to make a significant media
splash.
"Stella McCartney in 2005 and Roberto Cavalli in 2007 got a lot
of media attention. And Jimmy Choo in 2009 was probably the most
successful, with certain lines of the collection selling out in a
single day." By comparison, collaborations with Lanvin in 2010,
Comme des Garcons in 2008, and Viktor & Rolf in 2006, were
"quieter affairs."
But Versace, sported by celebrities such as Elton John and
Elizabeth Hurley, is higher profile than Lanvin and likely to set
the fashion world talking as the collection goes on sale at all the
flagship stores in major locations.
"The buzz in press and on Ebay for these collaborations is
phenomenal. Clothes from the collection quickly end up on Ebay at
much higher prices and you get pictures in the media of huge
queues, sharp elbows, armfuls of clothes, and general pandemonium
in the stores," said Critchlow.
H&M is not unique in collaborating with big name designers,
with British retailer Debenhams (DEB.LN) the first mass market
retailer to come out with the idea of designer collections back in
1993. Today its "Designers by Debenhams" portfolio, which includes
collaborations with U.K. designers like Betty Jackson and Matthew
Williamson, is part of its permanent collection and represents 25%
of sales.
Critchlow warned however that although H&M's collaboration
will garner a lot of media attention, it will not move the
company's share price to any great extent, as concerned investors
await H&M's second quarter profit figures due Wednesday.
As the company has already said that second quarter revenue fell
short of expectations, its gross margin will be closely watched and
eyes will also be on how well it has managed costs. Its bottom line
is expected to have taken a hit from higher raw material costs and
the appreciation of the Swedish krona against the euro.
Last year's Lanvin collaboration was available in 200 stores,
representing 10% of the company's floor space, while this year's
collaboration will be available from Nov. 17 in about 12% of its
stores, or 300 stores in addition to online.
At 1024 GMT, shares in H&M were trading up 0.7% at
SEK212.20.
-By Jens Hansegard, Dow Jones Newswires; +46-8-5451-3095;
jens.hansegard@dowjones.com
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