H&M: Success In The U.S.
By Rolf Eriksen; Paola Hjelt

(FORTUNE Magazine) – Four years ago Rolf Eriksen, CEO of the Swedish fashion discounter H&M, opened the outfit's first emporium in the U.S., on Fifth Avenue in New York City. Last quarter for the first time, the $7.4 billion, Stockholm-based retailer, which specializes in clothes like $9 tank tops and $25 denim jackets, posted an operating profit in the U.S. After recently opening its 1,000th store worldwide, in November H&M will launch its first designer line--an array of party clothes from Chanel's Karl Lagerfeld. FORTUNE's Paola Hjelt caught up with Eriksen to talk about the H&M-Ikea link, the American need for structure, and why he's not rushing to China. (And for Home Depot CEO Bob Nardelli's take on China, see "It's His Home Depot Now.")

You've been doing business in the U.S. for four years now. What have you learned?

Stores are more inviting in the U.S. than they are in Europe. In Europe you move staff from one area to another. In the U.S. people are more comfortable being specialized. If they are specialized in children's wear, they want to stay in children's wear. And they do a pretty good job there. I think the stores are better managed in the U.S.

Some of the early stores you built here haven't done so well. What was wrong?

The Fifth Avenue store in Manhattan was such a success, we thought that we could open bigger stores in the U.S. than in Europe. We made a mistake. The first seven or eight mall stores we opened were too big, but after that we opened smaller stores. We have signed contracts, and we're not going to run away from them. In the beginning it was a big problem, but it's only seven or eight stores out of about 70 stores.

And are you planning more specialized stores?

You will see more concept stores in the future. You will see a store for youth, a men's store, a children's store, or a women's store. It's a trend at the moment--the customer wants to frequent specialty stores.

Talk about your competitors. Anyone you admire?

We never talk about competitors. There are a lot of them, and good ones too. But outside the clothing industry, we are pretty close to Ikea. In many ways we have the same idea: It's two Swedish companies offering quality at low prices, and it's for the masses. Ikea's Kamprad family and H&M's Persson family have shared ideas and experiences for years. It's up to management in each country to make their own connection with Ikea, but we talk to them when we plan to enter a new country where Ikea is already established, or if they go somewhere we are present, we'll share our experiences.

You've benefited from a weak dollar, since so much production is in Asia. What happens if the dollar rises?

We have 5% lower prices at the moment because of the weak dollar. If the dollar gets stronger, we'll have to raise them.

Everybody seems to be rushing into China. Aren't you afraid that you're missing out?

No, when it's time for us to go into the Chinese market, we will be there. Our strategy is to grow about 15% per year. We still have a lot to do in Europe, and we have great opportunities in the U.S. and on the Canadian market. To be the first isn't our strategy. We went into the Polish and the Czech market last year--many of our competitors went in three or four years earlier, and I think we actually ended up going in at the right time. We went in when we knew the countries would join the EU, which made it easier to sell garments between the countries. It took us many years to find the right location in Italy, but now we have it, and we'll open two or three more stores this year and another five or six next year. As for Russia, China, or Japan, it will come--don't know when, but I know we will be there.

Okay, now be honest: Do you shop at H&M?

Not only. But I have a lot of H&M clothes. I also love Armani. When the new collection comes out, Mr. Lagerfeld will be wearing an H&M suit and so will I.