In this Wednesday, April 27, 2011, photo, Procter & Gamble products are displayed at a Target store in Richmond, Va. Procter & Gamble said Friday that its fiscal second quarter net income more than doubled and boosted its profit outlook as the maker of Tide and Pampers took back market share. (AP Photo/Steve Helber)
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In this Wednesday, April 27, 2011, photo, Procter & Gamble products are displayed at a Target store in Richmond, Va. Procter & Gamble said Friday that its fiscal second quarter net income more than doubled and boosted its profit outlook as the maker of Tide and Pampers took back market share. (AP Photo/Steve Helber)
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FILE - In this July 27, 2007, file photo, signs for American Express, Master Card and Visa credit cards are shown on a New York store's door. American Express says its net income fell 47 percent in the fourth quarter of 2013, as the credit card issuer racked up hefty charges related to restructuring costs and other one-time expenses. (AP Photo/Mark Lennihan, File)
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FILE - In this Thursday, Jan. 10, 2013, file photo, Jeffrey Vazquez, right, works with fellow traders on the floor of the New York Stock Exchange. Stock futures jumped Thursday, Jan. 17, 2013, as the government reported that weekly applications for unemployment benefits hit a five-year low and the construction of new homes surged. (AP Photo/Richard Drew)
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A man checks the electronic stock board of a securities firm in Tokyo, Tuesday, Dec. 18, 2012. Asian stock markets were mostly higher Tuesday, boosted by signs China's recovery is gaining traction and hopes for a new stimulus in Japan. (AP Photo/Itsuo Inouye)
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Men look at the electronic stock board of a securities firm in Tokyo, Tuesday, Dec. 18, 2012. Asian stock markets were mostly higher Tuesday, boosted by signs China's recovery is gaining traction and hopes for a new stimulus in Japan. (AP Photo/Itsuo Inouye)
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Deputy National Security Adviser for Homeland Security and Counterterrorism, John Brennan, President Barack Obama's choice for CIA director, speaks in the East Room of the White House in Washington, Monday, Jan. 7, 2013, where the president Barack Obama made the announcement. (AP Photo/Carolyn Kaster)
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President Barack Obama pauses as he speaks in the East Room of the White House in Washington, Monday, Jan. 7, 2013, to announce that he is nominating Deputy National Security Adviser for Homeland Security and Counterterrorism, John Brennan, right, as the new CIA director; and former Nebraska Sen. Chuck Hagel, left, as the new defense secretary. (AP Photo/Carolyn Kaster)
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President Barack Obama gestures during a statement on the fiscal cliff negotiations with congressional leaders in the briefing room of the White House on Friday, Dec. 28, 2012 in Washington. The negotiations are a last ditch effort to avoid across-the-board first of the year tax increases and deep spending cuts. (AP Photo/ Evan Vucci)
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President Barack Obama pauses during a statement on the fiscal cliff negotiations with congressional leaders in the briefing room of the White House on Friday, Dec. 28, 2012 in Washington. The negotiations are a last ditch effort to avoid across-the-board first of the year tax increases and deep spending cuts. (AP Photo/ Evan Vucci)
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President Barack Obama arrives to make a statement on the fiscal cliff negotiations with congressional leaders in the briefing room of the White House on Friday, Dec. 28, 2012, in Washington. The negotiations are a last ditch effort to avoid across-the-board first of the year tax increases and deep spending cuts. (AP Photo/ Evan Vucci)
New brand costs dent H&M's Q4 profits
STOCKHOLM (AP) — Fashion retailer Hennes & Mauritz AB is to press ahead with its global expansion plans with the opening of over 300 stores this year, even though it saw a modest decline in fourth-quarter earnings that the Swedish company blamed in part on higher investments in online shopping and the launch of a new brand.
Net profit in the quarter was 5.29 billion kronor ($825 million), 1 percent down from 5.36 billion kronor a year earlier, the company said Wednesday. The decline broke a three-quarter streak of rising earnings for H&M, which specializes in offering trendy fashion lines at low prices.
However, sales rose 5 percent to 37.9 billion kronor, from 36.2 billion kronor in the fourth quarter of 2011.
Chief Executive Karl-Johan Persson said H&M "stands strong" despite challenging market conditions and will continue expanding this year. The company opened 304 new stores worldwide during 2012 and plans to add 325 more this year, with the fastest rate of expansion in China and the U.S.
Persson said long-term investments in a range of areas, including online shopping and the upcoming launch of a new brand, & Other Stories, weighed on results.
"These long-term investments have created cost increases and to a great extent have not yet generated any revenue," Persson said. "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."
H&M shares dropped 2.7 percent to 228.40 kronor in midday trading in Stockholm.
Daniel Ovin, an analyst at CAI Cheuvreux Nordic in Stockholm, said the report was largely in line with expectations, but the cost of investments was higher than anticipated. He also said H&M's sales forecast for January was below expectations.
H&M's main competitor is Spain's Inditex, the owner of Massimo Dutti and Zara. Founded in 1947, H&M has more than 2,800 stores in 48 countries. Its other brands include the higher-priced COS and urban fashion labels such as Monki, Weekday and Cheap Monday.
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