Europe's Fashion Brands Expand in U.S. Even as American Stores Close Doors

By Saabira Chaudhuri Features Dow Jones Newswires

European retailers hungry for growth are pushing deeper into the U.S., with some using the overexpansion of their American counterparts as a chance to pick up consumers and prime locations.

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"We're not in all the malls we want to be in yet," said Nils Vinge, head of investor relations for Swedish fast-fashion retailer Hennes & Mauritz AB. "There is still opportunity for physical stores."

H&M opened a net 16 new stores in the three months to Feb. 28, bringing its total number of U.S. stores to 484. Competitor Zara, the Inditex SA-owned fast-fashion chain, also continued to grow its American presence, opening a net 10 stores through 2016, bringing its U.S. total to 78 as of Jan. 31.

The expansion comes as American retailers, pressured by online shopping and cut-throat competition, are closing stores at a record pace.

Credit Suisse estimates retailers will close more than 8,600 locations around the U.S. this year, which would surpass the number of closings during the 2008 financial crisis. Already this year 19 retailers including Payless Inc. and RadioShack Corp. have filed for bankruptcy protection, compared with 18 in all of 2016, according to S&P Global Market Intelligence.

Despite this, the $274 billion U.S. apparel market -- the world's largest, according to Euromonitor -- remains an attractive next step for European retailers looking to expand.

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"A lot of peers are closing down and leaving their stores, which of course opens up opportunities," Mr. Vinge said on a March investor call.

After Eastern Outfitters LLC filed for bankruptcy, Sports Direct International PLC last month swooped in to buy the Meriden, Conn.-based company's 50 Bob's Stores and Eastern Mountain Sports for $101 million. Sports Direct, the U.K.'s largest sports clothing and equipment chain, said the move would give it "a footprint in U.S. bricks-and-mortar retail."

As recognition of newer European retailers has grown in the U.S., so has their foothold. Discount clothing retailer Primark brought its brand of cheap chic to the U.S. in 2015, opening a store on the former site of Filene's Basement in Boston's Downtown Crossing. The Dublin-founded retailer, which will open its eighth U.S. store in June in Braintree, Mass., recently expanded its first U.S. store by 20% to about 93,000 square feet, saying awareness of the Primark brand had grown.

"Some international retailers see this as a great opportunity to get into markets they couldn't afford or [to] accelerate expansion," said Brandon Famous, a senior managing director focused on retail in the Americas for real estate services company CBRE Group Inc. But, he added, many smaller international brands are unlikely to be helped by rising store closures since they tend to look for prime locations such as top-tier malls, where business remains strong.

Amsterdam-based Scotch & Soda has opened three to four new outlets every year since its first U.S. store appeared in New York City in August 2010. The hip, midrange label now has 25 stores in cities including Miami, Chicago, San Francisco and Los Angeles. "Based on our positive business performance in the U.S.A., we are currently considering ramping up the rollout pace," a spokesman said.

Reiss Ltd., a favorite of Kate Middleton, took a more cautious approach as it entered the U.S. market, opening just eight stand-alone locations in cities like New York and Boston since 2005. But the family-owned British retailer has been bolder recently: Reiss opened two stores in New York last year and earlier this year opened one store in Miami. Superdry, which has 20 stores in the U.S., is also accelerating its expansion. The British casual clothing brand plans to open five stores over the summer and five more in the fall.

Write to Saabira Chaudhuri at saabira.chaudhuri@wsj.com

(END) Dow Jones Newswires

May 11, 2017 05:44 ET (09:44 GMT)