Swedish fashion retailer increases net profit in first quarter in spite of shrinking margins and announces further expansion
H&M – one of the world's largest clothes retailers – intrigued the fashion world on Thursday by pledging to launch a new chain.
The Swedish firm, which has 2,491 stores in 44 countries, kept details about plans to launch the stand-alone chain under wraps but said it will open in 2013 and it has "great faith in this new brand".
There was speculation that it could cater for wealthy or more mature shoppers because most of H&M's existing offer is aimed towards the younger end of the market.
H&M chief executive Karl-Johan Persson said the new chain would build on the launch of its offshoot COS, or Collection of Style, in 2007.
"Like COS, which today is very successful with good profitability, the new chain of stores will be independent and complement the other offerings from the group," Persson said.
The group reported a 13% rise in sales to 27.8bn Swedish kronor (£2.6bn) in the three months to 29 February but said margins were squeezed as it chose not to pass on the rising cost of cotton and put on more special offers.
H&M saw particularly strong sales growth of 21% in the UK, where it has 215 stores, and said the UK, US and China will be its fastest growing markets this year.
The Stockholm-based company stood by ambitious plans to increase store numbers by between 10% and 15% a year despite revealing lower-than-expected gross profits of 15.5SKr, an increase of 9.2%.
The company opened a new H&M store in Sofia, Bulgaria, this month, with plans for further outlets in Bulgaria, Latvia, Malaysia, Mexico and a franchise in Thailand by the end of the year.
Shares of fellow retailers Next and Marks & Spencer fell on London's FTSE 100 index amid fears that other chains would also struggle to pass on rising costs.
H&M claimed its tactic of not raising average prices had helped it increase its share of its fashion markets.