Hennes & Mauritz, the world's number two fashion retailer, has missed first-quarter profit and sales forecasts, raising doubts over its strategy of holding prices despite rising cotton costs.
The Swedish budget clothing chain reported a 30% dive in pre-tax profit to 3.54 billion crowns for the three months ended February. That was the third quarter in a row it missed forecasts.
H&M said the drop was mainly due to its decision not to pass on surging cotton costs and negative currency effects to shoppers.
'Instead of passing on these cost increases to customers, we chose to strengthen our price position in order to build further on our strong market position for the long term,' chief executive Karl-Johan Persson said.
Persson declined to comment on pricing plans for the year but analysts expect H&M, wary of its value-for-money image, to choose to continue to take a temporary margin hit, unlike other firms which aim to pass the costs on to customers.
