Swedish clothing giant Hennes and Mauritz (H&M) on Thursday announced the launch of its eighth fashion brand as tough market conditions in the US and Central Europe hurt profits.
The company reported a 3.4% drop in net profit in the December to February period, the first quarter of the company’s financial year, due to the combination of a slower than expected rise in revenues and seasonal discounts.
“To meet the rapid change that is going on in fashion retail we need to be even faster and more flexible in our work processes, for example as regards buying and allocation of our assortment,” CEO Karl-Johan Persson said in a statement.
H&M posted a net profit of 2.45bn kronor (256m euros, $275m), while turnover was up eight percent to 46.98bn in the same period.
Sales increased by four percent in local currencies, but the group has a target of 10 to 15% per year.
“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,” Persson said.
H&M’s share price dropped in response to the announcement, falling by 5.7% on the Stockholm stock exchange, vastly underperforming an overall market down just 0.8%.