NEW YORK (TheStreet) -- H&M just opened its largest store and while it seems to represent some rather lofty ambitions, it may be frightening the heck out of old-guard retailers such as Macy's (M) and JC Penney (JCP) or even Target (TGT).
On Wednesday, Swedish-based retailer Hennes & Mauritz, otherwise known as H&M, opened a new flagship store in New York City's Herald Square, just down the block from Macy's iconic location. With some 63,000 square feet of goods spread across four floors attended by about 225 trendy-looking employees, H&M's latest store, its 13th venue in Manhattan, is a fashion fan's dream -- or rather the dream of someone who enjoys appearing trendy on a budget.
"The tourists are coming to 34th Street," said Daniel Kulla, president of H&M North America in an interview, noting the store's proximity to the subway and two large entrances, as a few of the ingredients needed to feed it sufficient foot traffic to make it profitable.
Although H&M's claim to fame has been offering fashionable T-shirts and jeans at half the price of rivals, the imposing Herald Square location hints that executives of the company have grander ambitions. Men's suits priced at $79.99 cling to the broad shoulders of mannequins, with affordable dress shirts hanging nearby.
H&M sneakers and athletic T-shirts adorn mannequins posed in mid-run. On the store's fourth floor, cut-rate home goods -- everything from throw pillows for the couch to bathroom towels -- are on offer. The store also provides ample showcases for women's shoes and accessories -- two business areas that have historically been strong traffic drivers for the Macy's flagship store nearby.
So while H&M undoubtedly loves the attention it gains from its designer collaborations, it may be starting to perceive itself as delivering more of a one-stop shopping experience. H&M might not ever sell food and electronics, but everything else to fill a kitchen cabinet or bedroom closet appears to be on the table.
The foray beyond apparel comes just as European fast-fashion retailer Primark gets ready to establish a store base in the U.S. Next fall Primark will open its first U.S. store in Boston and has several others planned in spaces leased from struggling retailer Sears (SHLD).
"They are a tough competitor but we have to stick to our guns of offering great fashion at great prices," Kulla said.
H&M's grander vision may well present yet another challenge to retailers who are feverishly trying to keep up with low prices from the likes of Forever 21, Zara as well as H&M. Indeed, teen-apparel retail companies Abercrombie & Fitch (ANF) and Aeropostale (ARO) continue to close stores and bleed profits. In addition, an argument could be made that fast fashion drove the stake through the heart of teen-apparel retailer Wet Seal and played a helping hand in delivering the weak first-quarter results of Urban Outfitters (URBN).
Following a tour of the new location, TheStreet takes a look at three business areas that H&M is staking out.
1. Men's Suits
Although some retailers might lack the extra-slim styles that millennials are demanding, the Herald Square H&M displayed a good number of such suits and suit separates. Jackets were priced at just $79 and pants at $59.95. All were slim fit and paired alongside dress shoes or work-appropriate sneakers, which are becoming acceptable to wear in offices.
While Macy's and J.C. Penney (JCP) stores carry a men's suit section, stocked with the stalwart brands of companies such as Polo Ralph Lauren (RL) and Tommy Hilfiger, some department store players may lack extra-slim styles. According to luxury-department store retailer Nordstrom (JWN), 40% of its dress shirt sales are for regular fit, while 50% are slim fit and 10% are extra-slim fit. Five years ago, 60% were for regular-fit items and 40% were slim fit.
And at some major department stores, the prices for suits could also go higher than $500 -- enough to bust the budget of a recent college graduate trying to buy clothes for his first job.
2. Home Goods
Since August 2013, H&M has sold home goods in stores and online -- and the Herald Square store offers a large selection of sheets, pillows and bath towels. Indeed the fourth-floor home-goods department resembles what might be found inside a branch of Target or Bed Bath & Beyond (BBBY).
Competitors in the home-goods space including J.C. Penney, which derives more than 20% of its revenues from products for the home, might be wise to watch out.
3. Active Wear
H&M's workout-friendly T-shirts, shorts and sneakers won't be mistaken for the much higher-quality threads of Nike (NKE), Under Armour (UA) or Adidas. Those leading athletic-wear vendors produce more technical workout gear designed to keep a person dry or avert cramping; their wares even hold up well after frequent washing.
Yet the affordable pricing of H&M's active wear could eat into the sales of lower-priced styles offered by Nike and others at the stores of J.C. Penney and Kohl's (KSS).