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H&M

BUSINESS CONCEPT, GOALS AND STRATEGY

Business Concept

The H&M business concept is to offer fashion and quality at the best price.

Growth Target

H&M’s growth target is to increase the number of retail stores by 10-15 percent per year, as well as to boost sales in existing stores. The availability of attractive business locations is the major determining factor when it comes to our rate of expansion. Our goal is to grow at a controlled pace and maintain profitability. In 2005, 145 retail stores were opened and 20 were closed, increasing the net store count by almost 12 percent.

H&M is an expansive and financially strong company. Our strategy is based on the principle of growth in consideration of profitability and sustained control. In the past five years, we have increased revenues by 100 percent and the number of retail stores by 75 percent. During the same period, we increased profits per share by 262 percent. This expansion has been entirely self-financed.

Strategy

H&M’s collections are created by an in-house design and purchasing department whose goal is to offer our customers the latest fashion trends.

To maintain the fine quality of our merchandise, we continually carry out quality controls. At H&M, our quality concept goes beyond the high quality of the merchandise itself. We also strive to ensure that our garments have been manufactured with the least possible impact on the environment and under satisfactory working conditions.

We maintain the best price by:

  • limiting the number of middlemen
  • buying in large volumes
  • relying on our in-depth, extensive expertise within the design, fashion, and textile industries.
  • buying the right merchandise from the right production markets
  • being cost-conscious at all levels
  • maintaining effective distribution procedures

    • H&M FACTS

  • H&M opened its first store in Sweden in 1947.
  • H&M has almost 1,200 stores in 22 countries.
  • More than 100 designers, buyers, and pattern makers create H&M’s collections for women, men, teenagers, and children.
  • H&M also sells cosmetics under its own brand name.
  • New merchandise is delivered to our stores daily.
  • In the Nordic countries, H&M Rowells offers catalog and online purchasing of our fashions.
  • H&M does not own any factories. Instead, we work with about 700 independent suppliers located primarily in Asia and Europe.
  • H&M has 22 production offices around the world: 9 in Europe, 11 in Asia, and one each in Africa and Central America.
  • The company employs over 50,000 people.
  • 2005 revenues, including VAT, totaled SEK 71,886 million.
  • Profit after financial items amounted to SEK 13,553 million in 2005.
  • Profits per share totaled SEK 11.17, representing a 27 percent increase compared with the previous year.

EMPLOYEES AS AMBASSADORS OF OUR CORPORATE CULTURE

AT THE END of the 2005 business year, H&M had just over 50,000 employees. H&M’s strong company culture – the H&M spirit – has been present since the days of Erling Persson, H&M’s founder. Our strong culture is an extremely valuable asset and a contributing factor to our company’s success over the years.

The H&M spirit

The H&M spirit is based on a number of core values that describe the way we work. The foundation of this is our business concept – fashion and quality at the best price. The H&M spirit’s basic values include, among other things, common sense and personal initiative.

At H&M, individual decision-making and the assumption of responsibility is encouraged, and employees receive regular feedback regarding their work. One important aspect of our culture is the transfer of responsibility to the retail store level. Employees should feel a strong personal commitment to H&M, and individual initiative is encouraged. We believe that a good work environment increases creativity and enjoyment of one’s work.

Focus on employees

A major contributor to H&M’s success is the commitment of our employees. We believe in the ability of each H&M employee and encourage their personal development. Respect for the individual is one of H&M’s fundamental values. This applies to everything from fair compensation, reasonable working hours, and freedom of association to opportunities to grow and develop within the company.

Recruiting from within

H&M believes in recruiting from within the company whenever possible. External recruitment applies mainly to sales personnel in our retail stores. As they develop, these individuals form a solid foundation from which to recruit for more advanced positions in both the stores and in other functions within the company. In this way, the H&M spirit continues to spread, and employees have the opportunity to advance their careers.

Job rotation and skills development

Job rotation is a common practice within H&M. For example, store employees may be assigned to the sales counter, dressing room, and stockroom, or they may work on merchandise presentation and follow-up of advertisements and sales campaigns. Working in the stores provides invaluable experience and represents one way of learning about H&M from the ground up.

Our success depends on attracting and retaining enthusiastic and capable personnel. We therefore place a great deal of emphasis on skills development and training – which take place under our direction. At H&M, we strongly believe that the best way to learn is through active learning and on-the-job training.

After being assigned a trainer, each new store employee goes through an introductory training program. From there, specialized training in areas such as customer service, textiles, and displays take place as needed.

The introductory training program guarantees that everyone receives the same foundation and insight into the way we work at H&M. When it comes to management training, the emphasis is on becoming an excellent ambassador for – and representative of – H&M’s values.

Support and transfer of culture to new stores and countries

When H&M opens a new store, employees receive support from experienced colleagues who work in established H&M stores. These colleagues help get the store ready, recruit employees, and run the business. In addition, they are important ambassadors of the corporate culture and help pass on our values.

When H&M opens stores in new countries, the support and training they receive is particularly important. Often, several employees with special skills will move to the new country for an extended period in order to share their expertise and assure that the store is up and running in time.

For example, the 2005 flagship openings in Ireland and Hungary went smoothly, thanks to support from neighboring countries.

Organization –head office in Stockholm, 15 country offices, and 22 production offices

Corporate management is based at our head office in Stockholm, along with our main divisions for design and purchasing, finance, accounts, expansion, interior design and displays, advertising, information, communications, investor relations, human resources, logistics, security, IT, and CSR/Environment.

H&M has 15 country offices that are responsible for supporting various functions in our 22 sales countries. We also have 22 H&M production offices that handle contacts with the approximately 700 independent suppliers with whom we work. Nine production offices are located in Europe, 11 in Asia, and one each in Central America and Asia.