Clas Ohlson Targets Persian Gulf to Spur Ikea-Like Expansion

Clas Ohlson AB, Sweden’s biggest hardware retailer, plans to step up foreign expansion after opening its first store outside Europe this year as it seeks to mimic the success of local peers Ikea and Hennes & Mauritz AB.

The company, which sells everything from lawnmowers to chainsaws, plans to open its first distribution center outside Sweden as it pushes beyond its home market with plans to enter the Middle East and Germany, Chief Executive Officer Klas Balkow said in an interview.

“Our growth over time will come from the international arena,” Balkow, 48, said at the 96-year old company’s headquarters in the Swedish village of Insjoen.

Clas Ohlson, sometimes referred to by Swedish consumers as “a daycare center for men” given products that typically appeal to males, has grown from a mail-order retailer in 1918 to a chain with 183 stores in Sweden, Finland, Norway and the U.K. Company chairman Anders Moberg, a former CEO of Ikea, has said he aims to make it Sweden’s third retail-export success after Ikea and H&M. Growth-minded retailers in the country of only 9.6 million people have had to look abroad to meet their ambitions.

Clas Ohlson plans to open a store in Dubai this year, adding its first new market in six years. It sees potential for at least 20 outlets across the Middle East in the next five years and plans to enter Germany in 2015. The new distribution center will probably be located in northern Europe, most likely the U.K. or northern Germany, the CEO said.

Catching Up

Clas Ohlson shares have advanced 14 percent this year, following a 40 percent surge in 2013, valuing the company at about 9 billion Swedish kronor ($1.4 billion). The stock rose as much as 0.6 percent to 138 kronor in Stockholm trading today, and added 0.2 percent to 137.5 kronor as of 12:50 p.m.

There’s some way to go before the retailer can be mentioned in the same breath as its better-known Swedish peers. Sales of 6.7 billion kronor in the 12 months through January compare with annual revenue of 27.9 billion euros ($38.5 billion) at Ikea, the world’s biggest furniture retailer, and H&M’s sales of 128.6 billion kronor in the 12 months through November.

Achieving the same scale of expansion will be difficult for Clas Ohlson, according to Lena Larsson, CEO of HUI Research.

“They’ll have a harder time than H&M and Ikea to build an international brand,” Larsson said in a phone interview. “Clas Ohlson doesn’t have such a clear lifestyle link and is instead linked to everyday needs, so there is not as much to build on.”

Still, Balkow said the Middle East expansion makes sense because the business -- which also sells home and electrical goods -- will have little competition in the region.

Stronger Growth

Economic growth is also stronger than in Europe. The economy of the United Arab Emirates, of which Dubai is a part, will grow 4 percent both this year and in 2015, according to a Bloomberg survey of 17 economists published on March 20.

Merchandise is now arriving at the Dubai store ahead of the spring opening, shipped from a 77,000 square-meter distribution center in Insjoen that’s serviced by about 100 trucks every day.

To build its brand, the retailer is using its roots in a similar way to Ikea, which serves Swedish meatballs in its stores. When opening new shops, Clas Ohlson uses the blue and yellow colours of the Swedish flag and gives Dalecarlian horses -- a traditional carved, colorfully painted wooden horse from the region where Clas Ohlson is based -- to all employees.

“Clas Ohlson sounds Swedish and we make clear we are Swedish when we go international,” the CEO said.

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