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H&M lines up to compete in booming sportswear market

01/09/2014 | 01:05pm EDT
The company logo is placed at the flagship store of H&M, Hennes & Mauritz, HMb.ST, the world's second-biggest fashion retailer is seen in Stockholm

BERLIN/FRANKFURT (Reuters) - Hennes & Mauritz (>> H & M Hennes & Mauritz AB), the world's second-biggest clothing retailer, is launching a new sportswear line with the help of Sochi-bound Swedish Olympians in a bid to outpace discounters like Primark (>> Associated British Foods plc) that are snapping at its heels.

BERLIN/FRANKFURT (Reuters) - Hennes & Mauritz (>> H & M Hennes & Mauritz AB), the world's second-biggest clothing retailer, is launching a new sportswear line with the help of Sochi-bound Swedish Olympians in a bid to outpace discounters like Primark (>> Associated British Foods plc) that are snapping at its heels.

The global sportswear market will grow more than 7 percent in 2014, outpacing 5.8 percent growth for broader apparel, according to Euromonitor. H&M hopes that by muscling into a market seen to be worth $220 billion (£133.6 billion) this year it can move away from the cut-throat budget fashion area and towards higher-margin products could help it copy the success of Inditex's (>> Inditex SA) mid-market fashion chain Zara.

While unlikely to pose a serious challenge to pricey performance gear dominated by Nike Inc (>> Nike Inc) and Adidas AG (>> adidas AG), H&M could chip away at their sales of casual and fitness wear.

A pair of H&M's new fitness tights in a black, grey and white paint splash design cost 19.95 euros (£16.50), against 44.95 euros for plain black Adidas running tights made out of the German firm's patented quick-drying "climalite" material.

"Consumers, particularly female, are looking for fashionable, yet functional apparel," said Euromonitor analyst Ashma Kunde. "Players like Nike and Adidas should be wary. H&M doesn't have the same technology but it has a price advantage."

H&M's new line might also be dangerous for more fashion-oriented Puma (>> Puma AG Rudolf Dassler Sport) and Lululemon Athletica Inc (>> Lululemon Athletica inc.) - the Vancouver-based yoga wear firm whose soaring profits over the last decade have dramatically illustrated the popularity and potential of fitness fashion.

Adidas (>> adidas AG), which provides the full Olympics kit for most German and British Olympians, has long capitalised on the increasing blurring of the lines between fashion and function. Its sports style segment has grown faster than its performance brands in the last decade to account for 28 percent of 2012 sales.

FASHION AND FUNCTION

Supported by a shift to more active lifestyles, the sportswear market is expected to get a further boost from next month's Sochi Winter Olympics and the football World Cup in Brazil in June-July.

H&M has been testing the waters for its move into the market with pop-up shops during the London 2012 Olympics and a partnership in 2013 with Czech tennis player Tomas Berdych which copied a deal between Novak Djokovic and the Japanese clothing brand Uniqlo (>> Fast Retailing Co Ltd), which has a reputation for innovative fabrics in its casual wear.

H&M's new range for athletics, tennis, yoga, running and outdoors sports for adults and children launched this month has been tested for "fit and function" by Swedish Olympic athletes and includes quick-drying tops and breathable sports bras.

H&M has also designed a special collection for the Swedish team to wear at the opening and closing ceremonies in Sochi, plus a training and leisure wardrobe and competition outfits for a few sports like figure skating, curling and mogul skiing. The firm will also dress athletes at the 2016 Summer Olympics.

But the Swedes will not be wearing H&M for all sports - Adidas and specialist skiwear firms are among their other clothing providers - showing that H&M may find it hard to convince consumers who are also discerning sports enthusiasts.

"It requires research and development to get the performance element to go with the fashion side," said Berenberg Bank analyst John Guy. "It might work at the start, but then may be short-lived."

Puma is a good demonstration of that. Performance products now make up only a third of its sales where once they made up half, because of its focus on fashion in recent years - a trend that its new chief executive is working on reversing.

By comparison, Nike, the sponsor of the U.S. Olympic team has kept its focus firmly on sport over fashion - and retained its place at the market's top global brand.

(Additional reporting by Sophie Knight in Tokyo; Editing by Sophie Walker)

By Emma Thomasson and Victoria Bryan


ę Reuters 2014
Stocks mentioned in the article
ChangeLast1st jan.
ADIDAS AG 2.77% 274.4 Delayed Quote.-7.89%
ASSOCIATED BRITISH FOODS PLC 0.78% 1818 Delayed Quote.-19.70%
EURO / BRAZILIAN REAL (EUR/BRL) -0.08% 6.3248 Delayed Quote.0.87%
FAST RETAILING CO., LTD. -0.12% 72780 End-of-day quote.-21.29%
HENNES & MAURITZ AB 2.49% 168.54 Delayed Quote.-2.01%
INDITEX 2.53% 31.15 Delayed Quote.19.62%
MONCLER S.P.A. -0.03% 58.8 Delayed Quote.17.27%
NIKE, INC. 0.55% 158.01 Delayed Quote.11.69%
PUMA SE 0.69% 101.55 Delayed Quote.10.05%
TEAM, INC. -3.86% 2.74 Delayed Quote.-74.86%
THE GAP, INC. -2.64% 22.14 Delayed Quote.9.66%
UNDER ARMOUR, INC. 0.00% 20.51 Delayed Quote.19.45%
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Sales 2021 21 571 M 25 023 M 25 023 M
Net income 2021 1 502 M 1 742 M 1 742 M
Net cash 2021 449 M 521 M 521 M
P/E ratio 2021 36,1x
Yield 2021 1,17%
Capitalization 53 018 M 61 506 M 61 501 M
EV / Sales 2021 2,44x
EV / Sales 2022 2,21x
Nbr of Employees 58 007
Free-Float 86,9%
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Kasper Bo R°rsted Chief Executive Officer
Harm Ohlmeyer Chief Financial Officer & Labor Director
Thomas Hermann Rabe Chairman-Supervisory Board
Martin Shankland Head-Global Operations
Roland Nosko Member-Supervisory Board
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