Stockholm—H&M announced Thursday that it plans to open more stores this year than expected, even as its first quarter profit fell more than analysts expected.
For the quarter ended Feb. 28, the retail giant reported net income fell 10% to to 2.46 billion kronor (about $380 million). While analysts had expected net income of 2.51 billion kronor.
First-quarter sales rose 2% to 28.39 billion kronor, excluding value-added tax, Comparable store sales declined 3%. Operating profit fell to 3.13 billion kronor, slightly below a forecast of 3.17 billion kronor. Gross margin narrowed to 55.2% from 55.8% a year earlier.
“Sales have been characterized by the challenging situation for the fashion retail industry in many of H&M’s markets, mostly due to the continued tough macro-economic climate and unfavorable weather during parts of the quarter primarily in Europe and North America,” Karl-Johan Persson, chief executive, said.
The company also said its first quarter profits were hit by large long-term investments and substantial negative currency translation effects.
“2013 will be a challenging and exciting year with continued strong expansion,” Persson said. The company will open 350 new stores–more than a previous forecast of 325—and will enter Australia next year, he said. While most of the new stores will be in China and the United States, H&M will expand into Chile, Estonia, Lithuania, Serbia and in Indonesia via a franchise that already operates 48 stores.
And in a move to open a more upscale retail chain, the company plans to introduce its “& Other Stories”
concept in 10 European countries.