New brand costs dent H&M's Q4 profits

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Associated Press

Posted on January 30, 2013 at 2:02 AM

Updated Wednesday, Jan 30 at 2:06 AM

STOCKHOLM (AP) — Fashion retailer Hennes & Mauritz AB blamed higher costs developing a new brand and the effects of a stronger Swedish krona for a 1 percent fall in fourth-quarter profits.

The decline broke a three-quarter streak of rising earnings for H&M, which specializes in offering trendy fashion lines at low prices.

Net profit in the quarter was 5.29 billion kronor ($825 million), down from 5.36 billion kronor a year earlier, the Stockholm-based company said Wednesday. Sales rose 5 percent to 37.9 billion kronor, from 36.2 billion kronor in the fourth quarter of 2011.

H&M said it opened 304 new stores worldwide during 2012 and that it plans to add 325 more this year, with the fastest rate of expansion in China and the U.S.

Chief Executive Karl-Johan Persson said long-term investments in a range of areas, including online shopping and the upcoming launch of a new brand, & Other Stories, weighed on results.

"These long-term investments have created cost increases and to a great extent have not yet generated any revenue," Persson said. "However, we consider these investments to be both necessary and wise as they aim to secure future expansion and profits and thereby further strengthen H&M's position."

H&M's main competitor is Spain's Inditex, the owner of Massimo Dutti and Zara.

Founded in 1947, H&M has more than 2,800 stores in 48 countries. Its other brands include the higher-priced COS and urban fashion labels such as Monki, Weekday and Cheap Monday.

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