H&M to press ahead with new brand of stores despite 3pc fall in operating profit

FASHION CHAIN H&M is launching a new store brand this autumn, despite facing a slowdown in sales in key European and US markets.

The Swedish retailer reported a 3 per cent drop in operating profits to 3.15bn krona (£2.8bn) in the three months to February 28, citing lower than expected sales growth as well as higher markdowns in the first quarter.

Sales, including VAT, rose 7 per cent to 54bn krona (£48.8bn). Key markets like the US grew 6 per cent – but were flat when measured in local currency.

Chief executive Karl-Johan Persson said: “For fashion retail in general, market conditions were very tough in many of our large markets in central and southern Europe and in the US, and this was reflected in our sales.”

However, Mr Persson said it was gaining share in a number of other markets, across Scandinavia, and eastern Europe, as well as Turkey, Russia, China and Japan.

H&M is now charging ahead with plans to open 430 new stores this year, and announced the roll out of a new brand of stores called ARKET.

ARKET will be the eighth brand to run under the H&M Group umbrella – adding to H&M, COS, & Other Stories, Monki, Weekday, Cheap Monday and H&M Home – offering home goods and clothes at a higher price range than its H&M brand.

The first store will be opened in London and online this autumn, before launching in Brussels, Copenhagen and Munich.

It comes amid a 4 per cent drop in sales in the UK to 3.39bn krona (£2.97bn) for the first quarter – due in part to the weaker pound. In local currency terms, UK sales were up 5 per cent.

Liberum retail analyst Adam Tomlinson said that while poor first quarter sales numbers were expected, and lower profits should “not come as a huge surprise”, investors are still concerned about the rate of returns from new stores.