Tuesday, Sep 05, 2006
By Stefania Bianchi
Of DOW JONES NEWSWIRES
DUBAI (Zawya Dow Jones)--Hennes & Mauritz AB's (HM-B.SK) franchise agreement with Kuwait-based retail operator M.H. Alshaya Co., the Swedish retailer's first, is to be replicated across the Gulf, Alshaya Chief Executive Mohammed Alshaya said Tuesday.
In an interview ahead of H&M's first store opening in the region, Alshaya said: "There are plans to develop more stores in these cities (Dubai and Kuwait City) and we expect that they will be open in the first half of 2007."
This is the Swedish fashion store's first franchise agreement, said H&M spokeswoman Kristina Stenvinkel. Under the agreement, Alshaya has the right to open H&M stores in the Middle East.
H&M has more than 1,200 stores in 22 countries across the world.
The first two Middle East stores, one for young shoppers and one for families, will open in Dubai's Mall of the Emirates Wednesday. A third store will open in the Ibn Battuta Mall Sept. 13. The first shop in Kuwait City will open Sept. 20.
Under the franchise, Alshaya, which holds franchises for more than 42 international retail brands including The Body Shop, Starbucks Coffee and Debenhams, will run the local operations for the stores, managing job creation, staff training programs and other local issues, while H&M will have control over store locations, design and the supply chain.
H&M believes that the Middle East is a prime target audience.
"There is great potential and spending power in this region. There is a lot of excitement about this," Stenvinkel said.
Seeing a gap in the local market for affordable fashionable clothes, Alshaya first approached the Swedish fashion store about the joint venture over a year ago.
"There is huge potential for H&M in the Middle East. It is number one in its league for affordable fashion and I realized that the Middle East hasn't been well served for this up to now. I think the new stores will command a good position in the market," Alshaya said.
Alshaya is confident that the new stores will attract both Western and Arab clients, and says that the H&M brand is already well known in the region.
He said certain clothing items may be "deselected" if considered unsuitable for the local market, but denies any clash of cultures between the company's latest advertising campaign featuring Madonna and conservative Arab societies.
"Everybody needs to wear clothes - a baby suit can be for any baby, just like we all need to wear socks and trousers," he said.
Alshaya says the franchise is also a good business model for the Middle East.
"The franchise agreement we have with H&M is a win-win relationship. H&M can execute the development of stores quickly, while we know and feel the local market. We are also aware of the local issues and have a social responsibility for the region," Alshaya said.
"Under regional regulations, foreign companies are not allowed to completely own a company and are only entitled to own shares, so this also allows for greater interaction," he added.
Stenvinkel agrees that the partnership has been working well.
"Alshaya is taking a financial risk with this relationship, but Mohammed is an entrepreneur and he shares the same business ideas as us," she said.
Neither company would disclose their sales targets for the new stores, but H&M said the Madonna advertising campaign has been helping sales figures.
H&M will report its third-quarter results Sept. 27.
Based in Kuwait, Alshaya operates more than 1,000 stores across 11 countries.
-By Stefania Bianchi, Dow Jones Newswires; +971 4 228 0758; stefania.bianchi@dowjones.com
(END) Dow Jones Newswires
09-05-06 1015ET
Copyright Zawya Dow Jones Newswires 2006
