Hennes & Mauritz, 2000
In 2000, Hennes & Mauritz (H&M) was the second largest and most global player in the fashion retail business. It operated 682 stores, 80% of them outside its home country of Sweden, and achieved revenues of $3.0 billion and operating profits of $375 million. ). In 1999, when H&M announced plans to enter the US, sales had grown 20% per year and operating profits, 30%, for a decade. After the August announcement of US expansion plans, its share price hit a record $35 (a P/E of over 90). But the new millennium brought challenges and uncertainty. In March 2000, the first non-family CEO, Fabian Mansson, resigned after only two years at the helm and the company issued a profits warning. In September of 2000, H&M's share price closed at $18.68, a fall of nearly 50% from the optimism of the prior year. Meanwhile Gap, the world's leading fashion retailer with revenues of $13.7 billion, was adding 600 stores a year and expanding into Europe from its US base. Stefan Persson, the son of H&M's founder and the current chairman, spoke well of Masson's replacement, Rolf Erikson, "We are entering a hectic expansion phase and our new CEO is well-prepared for that. He can tackle these challenges better than anybody else." But Eriksen's relatively low-profile past as the head of H&M's Danish subsidiary impressed few analysts and questions lingered about H&M's ability to expand as quickly as they boasted. What did new CEO Rolf Erikson need to do to avert the threat from Gap and restore the company's fortunes?