H&M Unveils New Brand as Firm Seeks to Revive Profit

  • Arket is first new brand since 2014 launch of & Other Stories
  • H&M shares gain as quarterly profit beats analysts’ estimates

A customer passes a display inside an H&M store in London.

Photographer: Chris Ratcliffe/Bloomberg

Hennes & Mauritz AB announced the addition of its first new store brand in three years as the Swedish fashion retailer seeks to revive sales in key European markets.

The first Arket outlet will open in London in the fall, selling clothing and a limited range of home furnishings at prices slightly above the company’s main brand, H&M said Thursday as it reported first-quarter profit that beat analyst estimates. Stores in Brussels, Copenhagen and Munich will follow, and the brand will also sell online, initially in 18 European markets.

Arket is the company’s first new label since the launch of & Other Stories in 2014. H&M is seeking new avenues for growth as it struggles to keep pace with a larger rival, Zara owner Inditex SA, which has put a greater emphasis on e-commerce.

Read more: Fast Fashion Fading as H&M, Zara Shine Light on Industry Strains

H&M shares rose as much as 3.6 percent in early Stockholm trading, boosted by a smaller drop in earnings than analysts anticipated.

Pretax profit fell 3.6 percent to 3.21 billion kronor ($362 million), compared with an average estimate of 3.03 billion kronor. The beat was driven by better product buying and fewer markdowns, said Richard Chamberlain, an analyst at RBC Europe.

The fast-fashion retailer gets about 80 percent of its products from Asia, where the dollar’s strength has inflated the cost of purchases of garments, as many currencies in the region are linked to the currency. H&M is also battling with weaker sales in many of its “large markets in central and southern Europe and in the U.S.,” Chief Executive Officer Karl-Johan Persson said in a statement.

The Arket range will be supported by a selection of external brands, H&M said, without giving more details. Where possible, the stores will also include a cafe.

— With assistance by Paul Jarvis, and Anna Molin

(Corrects time period in second deckhead and second paragraph.)
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