This year’s H&M Met Gala looks played into the company’s renaissance. While H&M has actually been present on the Met Gala red carpet as far back as 2015 (and it’s also worth noting that Da’Vine Joy Randolph wore a custom made dress by ubiquitous denim brand Gap, while K-Pop band Stray Kids was dressed by Tommy Hilfiger this year), its presence this year was the strongest hand it has played as the company attempts to set itself apart from its mass-market counterparts.
Let’s face it, H&M has not had an easy time of it recently, so much so that it opted to change its CEO earlier this year with the newly appointed chief executive Daniel Ervér now charged with turning the Swedish giant’s fortunes around.
This new direction was first signaled some time ago with the launch of the more premium Studio collection as H&M’s response to margins being eroded by competition from a new wave of global discounters. The latest drop on May 9 of a Studio Resort capsule has been created around “effortless chic” but rest assured, H&M is working hard right now.
Let’s face it, H&M has not had an easy time of it recently, so much so that it opted to change its CEO earlier this year with the newly appointed chief executive Daniel Ervér now charged with turning the Swedish giant’s fortunes around.
H&M Profits Boost
Ervér received a timely boost in March when H&M posted a larger-than-expected first-quarter operating profit of $196 million, nearly triple the nearly $66 million in the same three months last year. During the first quarter, the retailer widened its profit margin to 3.9 percent, compared with a previous 1.3 percent as it continues to target a goal of 10 percent operating margin for the full year.
While sales slipped 2 percent to just over $5 billion, Ervér declared that the company is “fully focused on driving profitable growth going forward.” So, with an emphasis on boosting gross margin through improved quality and better prices, the brand made the most public of statements as it rubbed shoulders with luxury fashion at the Met Gala. It has also launched a new concept store in London focused on higher price points and a more affluent consumer.
“We are strengthening all parts of our assortment and our design organization’s most important mission is to create attractive collections,” said Ervér of the new strategy. “In this situation, our customer offering is more relevant than ever. Our top priority is to strengthen sales, and our target of a 10 percent operating margin for full-year 2024 thus remains in place.”
C-Suite Churn
Ervér is certainly overseeing better results than the downbeat performance that preceded him which led H&M’s then CEO to unexpectedly quit the world’s second-biggest listed fashion retailer. Outgoing CEO Helena Helmersson said that she decided to leave the company after four years at the helm and conceded at the financial update that she did not have the energy to continue.
In a statement, she said: “I have spent almost my entire professional life in the H&M group, and it is with mixed feelings that I have informed the board of directors of my decision to leave the CEO role. However, it has been very demanding at times for me personally and I now feel that it is time to leave the CEO role, which of course has not been an easy decision.”
The 42-year-old Ervér started as a summer trainee at H&M in 2005 and worked at various roles across the company. For the last four years, he’s been responsible for the H&M brand, the multi-brand group’s largest. One of his first moves as CEO was to greenlight a special destination store which opened in March on the Kings Road in Chelsea, London. The street has been associated with fashion since the Swinging Sixties. The new H&M shop focuses on the most fashion-forward womenswear, including a handpicked curation of “H&M’s most elevated designs and innovative pieces, alongside accessories and exclusive H&M Beauty products,” according to the company.
Swinging Sixties Reboot
In a distinct shift from the usual H&M store design, the new space has a more localized approach in tune with its environs and will also serve as a hub for events and activations. It combines a mix of “tactile surfaces and high gloss details to maximize flow and light over the three floors to ensure a simultaneously relaxing and upbeat shopping experience,” according to H&M. Design speak, but you get the idea.
The store was designed by H&M’s in-house architecture team and is located at 72 Kings Road, which is a Grade II Listed building. That means restrictions on how much the historic structure can be adapted. As a result, H&M chose to take design inspiration from the aesthetic of the neighborhood’s cultural heritage –- a center for fashion and art for more than 50 years. The store’s interior has been conceived to capture the essence of both the building’s heritage and the local surroundings.
“We are so excited to be opening a store on the King’s Road, given its significance in the history of London’s fashion and arts scene. The store embodies our ethos of fashion for the many, providing contemporary design that aims to empower and inspire,” explained Ann-Sofie Johansson, Head of Design at H&M, at the launch.
That heritage is best evidenced in the exterior, which has largely remained unchanged from the original and retains the building’s dramatic columns and fascia, with gold etched detailing against black window framing. The interior is unashamedly a blend of modern and classic, with natural wood floor finishes and a palette of greys punctuated by occasional splashes of H&M’s corporate red.
Will H&M Turnaround?
“The newly designed store celebrates what we stand for as a brand by promising our customers a world of curated products and elevated fashion experiences. London is a global hub of fashion and creativity, so we are proud to expand and evolve our presence here,” said Ervér confidently at the launch.
Will it be enough to turn the business around? Retailers of the scale of H&M are like cruise liners and typically need a huge turning circle to change direction. The shifts towards premium and higher margins make sense given the ferocious competition from online fast fashion players, plus the likes of Primark and the ever-successful Inditex brands, plus U.S.-expansion aspirant Mango.
The going is only going to get tougher, which makes the appeal of New York red carpets and cool-factor new concepts in upscale locations in London understandable. Keeping up with the competition clearly took its toll on H&M veteran Helena Helmersson, and her successor will need not only a singular vision but also the energy to keep H&M relevant for a new generation of fashion fans.
