H&M misses profit forecast as fashion battle heats upThursday 27 March 2014 11.05
Hennes & Mauritz, the world's second biggest fashion retailer, missed first-quarter profit forecasts as it invested to catch up with rivals online in an increasingly competitive budget clothing market.
The weaker than expected performance contrasts with solid results last week from bigger rival Inditex.
The Zara owner is benefiting from rapid growth in Internet sales as well as its stronger presence than H&M in emerging markets.
H&M and Inditex weathered the recent economic downturn in Europe better than many clothing firms, thanks to their focus on fast-changing fashions at affordable prices.
But competition has picked up, with discount rivals such as Britain's Primark and US group Forever 21 expanding across Europe and online firms such as ASOS grabbing market share.
H&M said today that its pre-tax profits rose 8% to 3.5 billion Swedish crowns ($542m) in the three months to the end of February, below even the lowest estimate in a Reuters poll of analysts.
The Swedish group said this was partly due to investments in IT and online - where it went live in France this month - as it tries to recover from a slow start in growing Internet sales.
But some analysts were disappointed by the 12% rise in quarterly sales at local currencies, which continued at that level in March, and were concerned higher than expected stocklevels could lead the firm to cut prices in the months ahead.
H&M's chief executive Karl-Johan Persson said the fashion market was "still characterised by a challenging macroeconomic situation", as much of Europe battles to emerge from recession.
H&M, which has almost 3,200 stores, about half that of Inditex, is targeting Australia, the Philippines and India as new markets this year and plans to roll out online services in Spain, Italy and China.
It is also responding to competition by broadening its product offering and rolling out new mid-market brands such as COS and & Other Stories, which it said will open stores in several new countries this year, including the US.
The group also said it would roll out its well-received new sports line to more stores and countries.