Hennes & Mauritz, the world's second biggest clothes retailer, reported a smaller fall than expected in its fiscal first-quarter profits as the impact of the strong US dollar started to wane.

However, H&M said that sales in March were weak. 

H&M, which had warned in January that higher purchasing costs would weigh on its first quarter due to the dollar strength, said the negative impact had started to decrease and should turn neutral or slightly positive by the fourth quarter. 

H&M has long enjoyed a profitability edge over its bigger rival Inditex by sourcing mostly in low-cost Asia rather than closer to home in Europe.

But it has seen that advantage eroded by the rise in the dollar, in which most Asian factories are paid. 

The company said that during the three months from December to February, its pretax profit fell to 3.3 billion crowns ($406m) from a year-earlier 4.7 billion due to the dollar impact and discounts to shift winter wear.

It still was better than a mean forecast of 3.2 billion in a Reuters poll of analysts. 

Sales in March, the first month of H&M's second quarter, grew 2% in local currencies, well below most analyst forecasts, although the company said an earlier Easter and cold weather complicated comparisons with last year. 

By contrast, Zara owner Inditex, the world's biggest clothing retailer, saw sales rise 15% at constant exchange rates in the first five weeks of its financial year that started in February. 

H&M said it would launch an e-commerce service in another 11 countries this year, including Japan, Greece, Canada and South Korea.

This is up from a previous target of nine and brings the total number of markets with online sales to 34.