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H&M Profits Up 6% in Q4

Hennes & Mauritz AB (H&M) said Thursday that strong year-end sales helped boost profits in the fourth quarter although gross margin growth suffered due to currency exchange rate effects and higher than expected markdowns.

The Swedish fast fashion retailer reported after tax profits of 5.61 billion Swedish kronor (SEK) ($857 million) for the three months ending in  November, up 6 percent from 5.3 billion SEK in 2012.

Gross margin for the fourth quarter was down to 60.8% from 61.6% over the same period last year.

Sales including value-added tax (VAT) were up 12 percent for the fourth quarter to 42.6 billion SEK ($6.5 billion) on particularly good sales in Asia and Southern Europe and a strong performance in online sales.

H&M CEO Karl-Johan Persson said, “This is a good result considering the substantial long-term investments that we are making in areas such as IT, online, new brands and broadening our product range.”

The retailer plans to invest in its fashion brand, & Other Stories, which it says has so far been well received and will also focus on its new H&M Sport line designed in partnership with Swedish Olympic Athletes.

Online sales will also see increased investments as H&M plans to continue its web expansion by opening in new online markets like France this spring or summer, and in three additional large markets later in the year.

The retailer opened 356 new stores in 2013, ending the year with 3,132 total stores and plans to add 375 more through 2014. Most of the new stores will open in China and the U.S. but H&M plans to expand in Russia, Germany, Italy and Poland and open its first stores in Australia and the Philippines.

H&M expects sales for January 2014 to increase by 15 percent in local currencies compared to January last year.

“The financial year 2014 has got off to a good start, with strong sales development in December and January. Although there are still macro-economic challenges in several of our markets, we are optimistic about 2014 which will be an exciting year with new countries and new opportunities. We have a strong belief in our offering and are convinced that we will strengthen our market position even further during the year,” Persson said.