Swedish fast fashion giant H&M Group recorded a 10.8% decline in profits to SEK4.66bn (£464m) in the three months to May 31, as a result of ‘unsatisfactory’ sales.
Revenues for the second quarter dipped 0.1% to SEK31.64bn (£3.1bn), while sales in local currencies increased by 5%. Like-for-likes decreased by 4%.
The drops were widely anticipated by analysts, with Drapers last week reporting that the pressure was building on the chain as a result of increased competition from the likes of Asos and Primark.
H&M said the disparity between sales in local currencies and reported sales was due to the negative impact of the stronger Swedish krona against most countries’ currencies.
Karl-Johan Persson, chief executive of H&M, said: “This quarter has been marked by substantial negative currency translation effects, which have had a negative impact on both sales and profits in SEK. Sales in local currencies increased by 5%.”
He added: “Although sales remained strong in Asia, overall sales were not satisfactory mainly due to the continued challenging situation for the fashion retail industry as well as unfavourable weather in March and a couple of weeks into April in many of our big markets.”
The period was one of “intense activity” for international expansion at the retailer, with almost 100 new store openings, including its first South American unit in Santiago, Chile.
Persson added: “We are continuing our strong expansion in Asia, where we now have 200 stores and where we are now starting to establish our newer brands like Cos and Monki.”
During the quarter the company opened the first seven stores of & Other Stories, in cities such as London, Paris and Milan and Cos will be expanding into Turkey and Switzerland this autumn.
The retailer is also launching online sales in the US in August as part of the global roll out of H&M’s online store, with the aim of adding several new online countries during 2014.
Sales increased 14% in local currencies in the period June 1 to 17, compared to the same period last year.