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H&M beats earnings estimates but warns on strong US dollar

LONDON (ShareCast) - The world's second biggest fasion retailer, Hennes & Mauritz, has reported better than expected first quarter pre-tax profit but warned that a strong US dollar would impact its sourcing costs this year. H&M, which has a huge presence in the UK high street, said first quarter pretax profit grew to SKr4.7bn from a year-earlier at SKr3.49bn while net income rose to SKr3.6bn, versus Skr3.3bn in the previous year.

Gross margin expanded to 55.2% from 54.9% a year earlier, H&M said.

The retailer said quarterly sales rose 9% in March compared to the same period last year.

However, it warned the US dollar's strength going forward is likely to impact costs. As H&M makes most purchases in US dollars while having a large share of sales in euros, there are fears the company's margins will be increasingly dented this year by US dollar appreciation.

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"The year has got off to a very good start and we have great faith in our offering. Although the strong US dollar will affect our sourcing costs going forward, we will make sure that we always have the best customer offering in each individual market," said chief executive Karl-Johan Persson.

H&M plans a net addition of around 400 new stores for the financial year this year with new markets for store expansion in Taiwan, which opened in February, Peru, Macau, South Africa and India.

It added that new online markets will open in 2015 for Portugal, Poland, the Czech Republic, Romania, Slovakia, Hungary, Bulgaria, Belgium and Switzerland.