Stockholm—Fast fashion giant H&M today reported its fourth quarter profit rose 6.1% but missed expectations with “disappointing” margins hit by increased discounting.
For the quarter ended Nov. 30, H&M said income rose to 5.61 billion kronor (about $869 million), missing the 6 billion kronor estimate analysts had expected.
Net sales rose 12% to 36.5 billion kronor, excluding value-added tax, H&M said in December. The retailer noted today it anticipates January sales will increase by 15% in local currency terms.
H&M also blamed in the pickup in discounting spurred across Europe as unseasonably warm weather hindered sales of winter apparel. Markdowns were up 0.1 percentage points during the quarter compared with last year. Gross margin narrowed to 60.8% from 61.6% a year ago.
“Competition is getting tougher all the time,” CEO Karl-Johan Persson said in an interview. He added that rivals are improving and there are new competitors on the scene. Not to mention, hard-pressed retailers in recession-weary countries such as Spain, Greece and Italy are increasing discounts, he said.
“We have great respect for the economic climate. I don’t think it will get a great deal better, I think it will get somewhat better,” Persson said looking ahead.
H&M plans to open 375 stores in the current fiscal year, up from 356 last year with most of the new locations planned for China and the United States. H&M also plans to open in India, Australia and the Philippines and South Africa in 2015.
Persson said H&M plans four “large” new online markets including France this year.
As of the year ended Nov. 30, H&M had 3,132 stores in 53 countries.