STOCKHOLM—Hennes & Mauritz AB announced an Autumn collaboration with Versace, which the cheap chic retailer hopes will boost its profile on the investor catwalk.
The Swedish fashion giant, which last week disappointed the market with a lower than expected rise in second quarter sales, said Tuesday the Donatella Versace-designed collection will hit its stores in November, giving sales a much-needed boost ahead of the key Christmas period.
The collection, which is the latest in a line of designer partnerships for the high street clothing chain, will likely give sales a short, sharp boost in November, but the long-term impact will be minimal given such collections tend to be limited and sell out in a matter of days.
The main benefit however will be the boost to the company's image as it has been struggling in recent months to persuade consumers to part with their cash, despite maintaining low prices at the expense of margins as raw material costs have spiraled.
Weaker-than-expected second quarter sales last week raised concerns that lower sales combined with higher cotton costs will hit gross margins hard, and the company's share price has fallen nearly 9% in the last month.
"Versace is one of the most important brands of recent times, and their collection for H&M will be glamorous and flamboyant—everything Versace stands for," said Margareta van den Bosch, creative adviser at H&M.
The Stockholm-based company said the collection will include ranges for women, men and selected pieces for the home. In addition, Donatella Versace has designed a pre-spring collection for H&M which will be exclusively available in countries with H&M online sales from Jan. 19, 2012.
H&M started its designer collections with Karl Lagerfeld in 2004 and collaborations since have included Stella McCartney, Roberto Cavalli, Comme des Garçons, Jimmy Choo and, most recently, Lanvin.
Société Générale analyst Anne Critchlow said all those collections had been a success, although to varying degrees, and she expects the latest collaboration to make a significant media splash.
"Stella McCartney in 2005 and Roberto Cavalli in 2007 got a lot of media attention. And Jimmy Choo in 2009 was probably the most successful, with certain lines of the collection selling out in a single day." By comparison, collaborations with Lanvin in 2010, Comme des Garçons in 2008, and Viktor & Rolf in 2006, were "quieter affairs."
Ms. Critchlow warned however that although H&M's collaboration will garner a lot of media attention, it will not move the company's share price to any great extent, as concerned investors await H&M's second-quarter profit figures due Wednesday.
H&M isn't unique in collaborating with big name designers, with British retailer Debenhams the first mass market retailer to come out with the idea of designer collections back in 1993. Today its "Designers by Debenhams" portfolio, which includes collaborations with U.K. designers like Betty Jackson and Matthew Williamson, is part of its permanent collection and represents 25% of sales.
As the company has already said that second-quarter revenue fell short of expectations, its gross margin will be closely watched and eyes will also be on how well it has managed costs. Its bottom line is expected to have taken a hit from higher raw material costs and the appreciation of the Swedish krona against the euro.
Last year's Lanvin collaboration was available in 200 stores, representing 10% of the company's floor space, while this year's collaboration will be available from Nov. 17 in about 12% of its stores, or 300 stores in addition to online. - WSJ
Written by: Jens Hansegard