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Business

H&M, Zara operator fashion aggressive global expansion

Powerhouse apparel pair show no need to narrow focus

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A Zara store in Barcelona highlights the mainstay apparel brand of Spanish company Inditex.   © Reuters

GENEVA -- Two European apparel titans are aggressively expanding their store networks and introducing various brands to new markets, wielding the resources to support a well-rounded growth that rivals appear unable to match.

Inditex, which operates the Zara apparel chain, said Wednesday it will open around 280 stores in fiscal 2017, equaling the Spanish company's fiscal 2016 expansion. H&M Hennes & Mauritz of Sweden seeks a net increase of 430 stores.

Inditex has established the foundation to heed customer needs quickly, CEO Pablo Isla said at the company's earnings briefing Wednesday. Sales for the year ended in January rose 12% to 23.3 billion euros ($24.9 billion), while operating profit grew 9% to 4 billion euros. The company set up shop in five new markets including New Zealand and Vietnam, operating in 93 overall, while store count rose to 7,292.

Management is driving growth by expanding multiple brands and product concepts rather than focusing business resources into selected fields. Inditex will roll out not only the mainstay Zara but also other brands like Bershka and Pull&Bear to offer different price points and capture multiple demographics. The Zara Home interior decor chain has grown dramatically in recent years.

H&M, continuing its push toward being the industry leader, operates on the same philosophy. Its sales for the year ended in November rose 6% to roughly the same level as that of Inditex. H&M will expand into five new markets including Vietnam, Kazakhstan and Colombia this fiscal year, opening multiple chains like COS and Monki simultaneously.

The two leading "fast fashion" companies continue to push envelopes. H&M held a fashion show in Paris this month, and items featured in the show became available at stores immediately after.

Both apparel giants also focus on e-commerce. Inditex operates online stores in 43 markets, with Thailand and India next to join. H&M expanded online sales to 35 markets in fiscal 2016 and will add six more in fiscal 2017. Many customers select items online and pick them up in stores. H&M CEO Karl-Johan Persson has called online earnings very satisfying.

Competitors are feeling the impact. Swiss company Charles Vogele's Dutch unit operating 95 stores filed for bankruptcy in January. Uniqlo operator Fast Retailing has been unable to catch up with the two powerhouses, though CEO Tadashi Yanai seemingly has the wise mindset that "global" and "digital" are the two major trends in the world. The Japanese company lowered its sales target of 5 trillion yen ($44 billion) for 2020 to 3 trillion yen last fall.

Rivals of the two extra-large apparel companies are learning that low-price, high-quality clothing is no longer enough to catch up. Inditex and H&M both have global logistics networks to deliver items quickly, and are aggressively investing in information systems.

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