Hennes & Mauritz AB is selling 10-euro bikinis online in a bid to regain its crown as Europe's largest clothing retailer. The strategy might help boost the shares more than 10 percent.
H&M began retailing on the Web in Germany and Austria in 2007 and may expand into the United Kingdom within a year, Kaupthing analyst Aasa Mossberg said. The Internet may account for about 7 billion kronor ($1.1 billion) in sales, or about 5 percent of total revenue, by 2011, Mossberg estimates. H&M's online business will succeed because it caters to Web-savvy teens and young women, Dresdner Kleinwort analyst Geoff Lowery said.
The Internet will also help accelerate revenue growth to 15 percent in 2011, according to estimates compiled by Bloomberg. That would help H&M's sales expansion rate outpace that of Europe's biggest clothing retailer, Inditex SA, which doesn't sell apparel online, for the first time since 2001. With tops selling for as little as $7.90, H&M's inexpensive outfits may also appeal to budget-conscious shoppers as economic growth slows.
"H&M is catching up with Inditex, and online is one of the reasons why," said Anne Critchlow, an analyst at Societe Generale in London who recommends buying shares of both. "H&M used to be a cautious Scandinavian company, not pushing online sales as much and not moving into new markets as much. That has changed."
After a 13 percent decline this year, H&M may rise to 381.5 kronor, according to analysts' estimates compiled by Bloomberg, 12 percent higher than the shares' current price.
Twenty analysts recommend buying the Stockholm-based company's stock. Six suggest holding and five say to sell. The shares closed at 340.5 kronor on Monday, down 2.4 percent.
Arteixo, Spain-based Inditex, which owns Zara stores, became Europe's biggest clothing retailer in 2006 by annual revenue. It may start offering apparel online after introducing sales of home furnishings over the Internet last year.
The company reported its smallest profit increase in four quarters in December because consumers pared spending following the end of a decade-long Spanish homebuilding boom.
