CEOInterviews.AIPersson Says H&M to Launch U.S. Internet Store Next Fall

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Interviewer0:00

So I'd like to start talking about cotton prices. They have started to come down now. When will this shine through in your results for next quarter?

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Karl-johan Persson0:13

Cotton prices will still have a negative effect. But for purchases being done now, cotton prices are in line with or a little bit better than at the same time last year.

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Interviewer0:23

Okay, so what are your thoughts on cotton prices going forward? Do you see them coming down even further?

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Karl-johan Persson0:30

How much prices have come down from the peak. It's looking better, but I don't know exactly what will happen. My guess is that demand will come down further, so hopefully that will lead to lower cotton prices.

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Interviewer0:43

Okay, about other costs like labor cost and transportation, do you have any thoughts on the trends there?

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Karl-johan Persson0:51

Transport costs are in line with or a little bit positive now compared to last year at the same time. Labor costs have been rising. When it comes to surplus capacity at the suppliers, it looks a little bit better compared to last year.

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Interviewer1:08

Okay, you've said that the online sales start in the US has been delayed, postponed. What did you not foresee?

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Karl-johan Persson1:19

It's quite a big thing to enter the world's biggest market with online selling. We want to make sure we do it with quality. There are many components before entering a market: assortment planning, IT issues, customer service, logistics. We want to do it in a qualitative way. When we came closer to the launch date, we felt we needed more time, so that's why.

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Interviewer1:55

So was there anything in particular?

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Karl-johan Persson1:57

No, just a combination of many things. We felt we needed a little bit more time, so we will launch it during autumn instead of spring next year.

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Interviewer2:06

Okay, do you feel that this has in any way eroded your credibility in this?

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Karl-johan Persson2:08

No, I don't think so, not at all. I think the most important thing is to enter in a good way, and I'm sure we will do that during the autumn instead.

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Interviewer2:19

Okay, what will happen to online expansion after the US?

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Karl-johan Persson2:21

We will enter more markets. I don't have any dates to announce today, but we will enter more markets. We see that our online selling will work well in all our markets where we are present with physical stores.

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Interviewer2:39

Okay, will you speed up pays in any way?

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Karl-johan Persson2:41

Again, I'm not going to say today how many stores or how many countries we will enter and when, but we will roll out our online shop in many markets.

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Interviewer2:56

Okay, what can you or will you do to keep sales numbers up in this tougher economic environment?

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Karl-johan Persson2:58

We will continue with our constant improvements. We saw in 2010 we grew 15% in local currencies, and for the first 9 months this year we have grown 9% in local currencies. That shows we are performing well in a tough economic environment. We're optimistic and have great belief going forward.

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Interviewer3:27

Okay, would you consider raising prices?

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Karl-johan Persson3:27

No. The most important thing for us is that we stick to our business idea: fashion and quality at the best price. We do that in every market, and that's where we have the focus.

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Interviewer3:40

Okay, a different question: Would you consider cutting prices to keep market share?

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Karl-johan Persson3:41

We again, we don't go into detail on how we work with prices, but we stick to our business idea and we have a long-term focus on the business.

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Interviewer3:55

Okay, is this tougher environment financially a good or a bad thing for a company like H&M?

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Karl-johan Persson4:00

It depends. If we look at the total selling, last year 15% up, this year we're 9% up in local currencies. That shows we're performing well during tough economic times. Private consumption is down in many markets, but with our business idea of fashion and quality at the best price, many customers want value for money, and H&M is the best place to go. So in that way it's good, and we are taking market shares.

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Interviewer4:34

Okay, how much more market share can you take? Would you like to take more?

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Karl-johan Persson4:34

Yeah, we can't give you a figure, but we're planning to continue to improve. We have an optimistic view when we look into the future, so I think we will perform well.

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Interviewer4:53

Okay, you said your inventory is higher than last year, but that it's well balanced. What does that mean?

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Karl-johan Persson4:58

That we have good balance, a lot of new fresh autumn garments. That's what it means.

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Interviewer5:06

Okay, so September sales was lower than you had expected. Yes. And you also sort of mentioned that it would be crucial what happens in October, November. Could that crucial point be postponed to November, or is it October we should be keeping our eyes on?

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Karl-johan Persson5:24

Both months are important. I don't want to give you an exact date, but what we see is we are performing well in many markets where the weather has been more normal during September. We have a great collection, good fashion level, good quality, and great prices, so we have a good belief in that.

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Interviewer5:46

Okay, and the ever-present question about expansion into the Southern Hemisphere. What's going on with that?

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Karl-johan Persson5:50

We are looking, continuing to look into new markets. We've been to South America several times, looking at a number of countries there. We have been to South Africa, Australia. So there are many interesting markets. But we are not only looking at markets in the Southern Hemisphere; we're also entering new markets: Bulgaria next year. So we have to set the total expansion plan that feels good for us, and we will enter those markets as well.

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Interviewer6:22

Great for them. But what is stopping you at the moment from entering these markets?

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Karl-johan Persson6:24

Nothing is stopping us. We believe we can do it and do it in a good way. It's just again setting the total expansion plan that feels good for us. It's a lot of work behind entering a new market, and we want to make sure we do it with quality. We can't do all markets at the same time.

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Interviewer6:45

Can you give me a sort of... it won't happen at least before we do this or before this date?

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Karl-johan Persson6:49

I don't want to give you a date.

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Interviewer6:51

Do you think it could happen as soon as next year?

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Karl-johan Persson6:53

We will enter new markets next year, but we'll just have to wait and see which ones exactly.