By Dominic Chopping

STOCKHOLM--Fashion retailer Hennes & Mauritz AB (HM-B.SK) said Thursday that its first-quarter net profit dropped 3% from a year earlier after seeing lower sales growth than planned and increased mark-downs.

The company said the fashion retail market has been tough in many of its large markets in central and southern Europe and in the U.S., and this was reflected in sales. In response, H&M will invest heavily in its supply chain, such as in new logistics solutions with greater levels of automation, and in optimising lead times.

It is also shuffling its store portfolio, paying particular attention to markets that did not perform sufficiently well, which will see closures, the addition of more store space and rebuilds while also developing a new and upgraded version of its H&M stores.

The cheap-chic retailer also announced a new brand that will be launched in early autumn this year called ARKET, offering a range of clothing for men, women and children, as well as a small assortment of home products. The range will be supported by a selection of external brands, it added.

H&M's net profit in the first quarter, which runs from Dec. 1, 2016 to Feb. 28, 2017, was 2.46 billion Swedish kronor ($277.1 million), compared with SEK2.55 billion for the same period last year, but topping expectations of SEK2.34 billion according to a FactSet poll.

Write to Dominic Chopping at dominic.chopping@wsj.com; Twitter: @domchopping @WSJNordics

(END) Dow Jones Newswires

March 30, 2017 02:51 ET (06:51 GMT)

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