Last updated: January 30, 2013 3:39 pm

H&M plans record openings as sales flag

The window display of an Hennes and Mauritz shop.©PA

Hennes & Mauritz is examining Australia, Brazil and South Africa as possible new markets in which to expand, as the Swedish purveyor of cheap chic plans to open a record number of stores this year.

H&M expects to open 325 shops this year after 304 in 2012, itself ahead of its initial target of 275. It is planning to open its first store in the southern hemisphere in Chile this year, and Karl-Johan Persson, chief executive, said the group was looking at other countries in South America, Africa and Asia.

“We have the financial strength to invest even in tough economic times. We always take long-term views and we see some opportunities,” he told the Financial Times, pointing to better deals on rent in troubled European countries such as Greece, Spain and Portugal.

His comments came as high expansion costs caused the group to post the latest in a series of earnings that came in slightly below analysts’ expectations. It also warned that sales in January were likely to only rise modestly, again below forecasts, due to very cold weather in many European countries in the second half of the month.

H&M has suffered in recent years from comparisons with Spain’s Inditex, the owner of the Zara brand that is the world’s biggest fashion retailer by sales. The Swedish group has struggled to maintain the sales growth in its existing stores, with growth of just 1 per cent in 2012, while it has suffered repeated delays in starting its online offering in the US, an increasingly important sales channel.

Mr Persson said that in many of its European markets 2012 had been as challenging as the previous year. He warned that this year, at least in the first half, would be similar.

He added that the challenges were not just in troubled European countries but ones like its biggest market, Germany. “We have also seen in more stable economies in Europe, like Germany, Sweden, Switzerland, the Netherlands and the UK, that it is also tougher for the clothing industry,” Mr Persson said.

H&M said total sales in January were likely to be about 5 per cent higher than a year earlier, with analysts suggesting that meant sales had shrunk in its existing stores.

Pre-tax profits in the fourth quarter – which runs from September-November for H&M – were SKr6.6bn ($1bn), lower than the consensus forecast of unchanged earnings of SKr6.8bn, as big investments in online sales and IT as well as the strong Swedish krona weighed on results.

Shares in H&M fell 2.6 per cent to SKr228.8 in morning trading in Stockholm.

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