Hennes & Mauritz, the world's second-biggest fashion retailer, has warned of a "very negative" impact from higher purchasing costs for the rest of the year due to the strong dollar, which also dented second-quarter profits.
H&M sources 80% of its clothes in Asia in contracts denominated in dollars while selling most of them in Europe.
It said external factors such as raw material prices, cost inflation, capacity at suppliers, purchasing currencies and transportation costs all had a negative effect in the last three months.
The company said the situation could be even worse for its third and fourth quarters due to the rise in the US currency.
Unlike H&M, its bigger rival Inditex, owner of the Zara chain, produces its garments itself and sources more in Europe than H&M.
H&M also said today that the pace of long-term investments it is making in areas like ecommerce and new store concepts, which will be higher in 2015 than 2014, could run unevenly over the remaining quarters.
"Although these long-term investments currently involve costs, we see them as necessary in order to build an even stronger H&M," its chief executive Karl-Johan Persson said in a statement.
Unusually cold spring weather in many of the company's important European markets and calendar effects had a negative impact on its performance, H&M said.
The company said its pre-tax profit in the second quarter rose to 8.44 billion Swedish crowns from 7.64 billion in the same period last year, just short of the average forecast by analysts of 8.48 billion.
H&M, which has the bulk of its business in Europe, with Germany its biggest single market, said that so far in June, the first month of its third quarter, sales were up 14% in local currencies from a year ago.
