H&M’s massive threat to David Jones Limited and Myer Holdings Ltd

Swedish retailer could open hundreds of stores across Australia

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While David Jones Limited (ASX: DJS) and Myer Holdings Ltd (ASX: MYR) continue on their merry way towards discussions about a merger, an enormous threat could be about to blindside the two department stores.

Global fast fashion retailer H&M has revealed that it may open up to six department stores in Australia in the next few years, and many more could be on the way. Already operating in 53 countries, H&M chief executive Karl-Johan Persson has told Fairfax media that the company has 150 stores in its home market in Sweden, which has a population of around 9 million. Given Australia’s population is slightly over 22 million, H&M may eventually open hundreds of stores here.

“In any market we go into we take it step by step, we have a huge respect for Australia even though we are successful in all the markets we have entered into so far, it’s a new set up for us, a fantastic new store and I think it will be successful, and if it is, well we are already now looking for stores in Sydney, Perth, Adelaide, Brisbane and some other cities,” Mr Persson said. ”We are looking for suitable properties and at more cities.”

H&M is launching its maiden store in Melbourne on Saturday, which will be 5,000 square metres in the city’s historic GPO building, right next door to Myer’s flagship store as well as being near David Jones and newcomer Zara. An online site is expected to follow soon.

The H&M stores will offer its low cost private label brands rather than well-known fashion names, sold by the likes of David Jones and Myer.  Operating in fashion and homewares pits H&M directly at Australia’s two dominant department stores.

Foolish takeaway

International fashion brands have entered Australia en masse over the past few years, seeking to take advantage of Australian fashion retailers being slow off the mark to offer competitively priced fashion products. Those effects are already being felt, with fashion retailer Noni B Limited (ASX: NBL) reporting a 14% fall in same store sales for the first quarter of this year. Noni B said customers were expecting to get substantial discounts, which the retailer had tried to resist. It will be interesting to see how Premier Investments Limited’s (ASX: PMV) Just Group has fared over the same period.

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