(Corrects spelling of town where Inditex is based)
Nov. 19 (Bloomberg) -- Hennes & Mauritz AB is looking to bring back the Lagerfeld effect.
Since shoppers mobbed H&M stores in November 2004 to grab the Chanel designer’s clothing at a fraction of the usual cost, the retailer has failed to recreate the same effect on revenue growth with subsequent collections. The Stockholm-based retailer’s latest attempt is a line by Paris fashion house Lanvin, which goes on sale Nov. 23 worldwide.
“Sequels always draw less attention,” said Armando Branchini, a consultant at Intercorporate in Milan, of the collections after Lagerfeld, which lifted monthly revenue by 24 percent. That said, “The Lanvin designers are very well known in the fashion world and these collections always draw a lot of attention and H&M benefits.”
H&M’s sales growth may accelerate this month for the first November since 2007 as shoppers regain the confidence to splash out on $249 evening dresses and $299 tuxedos by Lanvin, estimates Luca Solca, an analyst at Sanford C. Bernstein. Revenue growth slowed in the last two Novembers as shoppers concerned with the credit crunch were less enthusiastic about H&M lines of Jimmy Choo sandals and Comme Des Garcons dresses.
Lanvin, founded as a milliner’s boutique in Paris in 1889, is known for ruffled and flowered cocktail dresses, according to Vogue magazine. The designer sells draped T-shirt dresses for $1,225 and satin ballerina flats for $625 on its website. The H&M collection will be introduced in the U.S. on Nov. 20 at the opening of its third store in Las Vegas.
H&M uses the ranges, which have also been designed by Stella McCartney and Roberto Cavalli, to stir shoppers’ interest. The selections typically sell at a premium to the company’s regular clothes, allowing for a boost of as much as 1 percent to the annual margin, Solca estimates.
H&M, which sells dresses for less than $10, grabbed worldwide attention with the Karl Lagerfeld collection. Other retailers including Philip Green’s Topshop have followed the trend of celebrity-designed clothing and Gap Inc. is working with Valentino on a seven-piece collection that will be for sale in Italy starting tomorrow.
The Lagerfeld collection featured black sequin jackets for $129.90 and double-breasted wool coats for $149. Stores were mobbed as shoppers in 20 countries sought out the products, some of which sold for double the retail price on EBay Inc.’s auction site days later. The rise in total revenue that month was the fastest pace in three years at the time.
A collection by Stella McCartney, which was sold at fewer shops than the Lagerfeld one, helped boost revenue by 11 percent the following November. The range included dresses for $99.90. Her clothes sold for more than $1,000 at the time.
Last November, when the Jimmy Choo collection was introduced, H&M reported 1 percent total sales growth, the slowest since it introduced guest ranges. The year earlier, in the month of the Comme Des Garcons collection, sales rose 7 percent, down from a 14 percent gain in the prior period when H&M sold a line by Cavalli.
Charlotta Nemlin, a spokeswoman for H&M, declined to comment on the cost of holding the collections or its advertising budget for them, adding that “if we didn’t believe that a designer collaboration would be profitable for us, both in terms of sales and image, we wouldn’t do it.”
So far, the collections strategy hasn’t given enough of a boost for H&M to keep up with rival Inditex SA, which owns Zara stores. The Arteixo, Spain-based company overtook H&M in 2006 as Europe’s biggest clothing retailer. Inditex, which limits its advertising to newspapers for its sales in some countries, has expanded around the world more rapidly and now has more than twice the outlets that H&M has.
For Inditex, “prime stores, store windows, store environment and the product build the brand,” said Anne Critchlow an analyst at Societe Generale in London.
“Inditex fashion is so “fast” that the customer doesn’t need to be persuaded to buy it through advertising, it is the product that he/she already wants,” she said.
Still, analysts don’t want H&M to stop the collections altogether.
“Designer collaborations help nevertheless to increase H&M’s fashion appeal and provide better economics, contributing to margin increases,” Solca said.
Vogue magazine had more pointed advice for its readers, telling them to sharpen their elbows in preparation for the new collection.
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