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H&M profit drops 18% on high costs; plans 178 new stores in second half


Stockholm, Sweden -- Hennes & Mauritz AB reported Wednesday that net income for its second quarter dropped 18% to $673 million, from $817 million in the year-ago period.

The Swedish fashion retailer blamed higher procurement costs and promotional offers for the lagging performance.

Sales edged up to $5.1 billion from $4.96 billion in the prior year quarter, but gross margin shrank to 61.7% from a previous 65.9%.

Despite higher purchasing costs and a weak U.S. dollar, H&M said it remains focused on growth. CEO Karl-Johan Persson said his company sees "great potential for future growth in existing as well as in new markets."

Toward that end, H&M is planning 178 new stores in the second half of this year, with China, Britain and the United States set to be the main expansion locations. Nineteen shops will be closed in the same period.

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