H&M must raise the bar to counter fierce fast-fashion competition, says CEO

By Helen Reid

STOCKHOLM (Reuters) - H&M cannot win on price alone and must make its clothes more trendy and of higher-quality in the fiercely competitive fast-fashion sector, its CEO Daniel Erver told Reuters.

In his first year as CEO, Erver has spearheaded investments in marketing to boost the H&M brand's appeal, as well as a push to speed up product development as the retailer tries to regain market share from rivals like Inditex-owned Zara.

H&M must keep improving its products in terms of quality and trendiness in order to give customers value for money, Erver said in an interview on Thursday after the Swedish company's fourth-quarter sales missed expectations.

"Just competing on lowest price will not cut it for us, we need to step up and raise the bar," Erver said.

Online-only retailer Shein has undercut H&M and Zara with ultra-low prices for dresses, tops, jeans and accessories, forcing them to find new ways of differentiating themselves.

H&M will keep investing in social media influencers and collaborations with pop stars like Charli XCX, Erver said, to reach more fashion-conscious young women.

"To start accelerating the work of gaining market share and ... positioning ourselves, it's been really important to win the fashion-interested female customer, and especially the young generation, because she will shape the industry for the future," Erver said.

As well as increasing its reach through social media, drawing more customers through its doors is key for H&M, which has been cutting its overall store count but refurbishing some in key cities.

H&M's premium Arket brand is opening its first stores in Austria, Norway, Greece and Ireland this year. These will include cafés, as part of a push to get shoppers to linger for longer.

While not satisfied with the overall performance, Erver said H&M's higher fourth quarter operating profit margin was partly thanks to a stronger product mix.

H&M's chief financial officer, in a separate interview on Thursday, said changes it is making to shorten its supply chain and speed up its design process could cut the time between product idea and arrival in-store by as much as 50%.

(Reporting by Helen Reid; Editing by Alexander Smith)