Expansion costs hit H&M earnings

STOCKHOLM (Reuters) - Hennes & Mauritz reported an unexpected fall in quarterly profits on Wednesday due partly to increased costs from the fashion retailer's push to compete with Spanish rival Inditex.

H&M, the world's second-biggest apparel group after Zara owner Inditex , said earnings were affected by long-term investments in online shopping, a new chain of stores, plans to broaden its fashion range, and an unusually strong Swedish crown.

The retailer has the bulk of its business in Europe, where the region's debt crisis and rising unemployment have dampened consumer spending.

"These long-term investments have created cost increases and to a great extent have not yet generated any revenue," said chief executive Karl-Johan Persson.

"However, we consider these investments to be both necessary and wise as they aim to secure future expansion and profits and thereby further strengthen H&M's position," he added.

Pretax earnings in the September-November period fell to 6.6 billion crowns ($1.0 billion) from a year-earlier 6.8 billion. Analysts polled by Reuters had on average forecast an unchanged profit.

The gross margin, which disappointed in the third quarter, shrank to 61.6 percent from 61.9 percent, matching forecasts.

H&M shares fell 2.9 percent by 0810 GMT.

($1 = 6.3815 Swedish crowns)

(Reporting by Anna Ringstrom. Editing by Patrick Lannin and Jane Merriman)

Source: http://news.yahoo.com/h-m-q4-pretax-lags-consensus-keep-store-072502345--finance.html

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