Swedish fashion chain Hennes & Mauritz AB Thursday said its first-quarter net profit fell by 12 percent due to shifts in foreign exchange rates and lower consumer spending amid the global economic downturn.

Europe's second largest clothing retailer said net profit for the three months ending Feb. 28 fell to 2.6 billion kronor ($321 million) from 2.9 billion in the same period a year earlier.

First-quarter sales, excluding value added tax, rose 18 percent to 23.3 billion kronor from 19.7 billion kronor a year ago. The increase in local currencies was 4 percent.

The company said the sales were "affected by a continued restrained consumption due to the current recession," but pointed out that online and catalog sales have developed positively.

H&M makes its purchases in U.S. dollars and hedges 90 percent of the costs to protect itself against currency swings. However, it said the strengthening of the dollar against the Swedish krona had a negative effect on the remaining 10 percent, weighing on results.

It also said its hedging policy meant it missed out on 500 million kronor ($61.8 million) in positive currency effects.

Hagstroemer & Qviberg analyst Stefan Billing said the result was weaker than expected, mainly due the fact that H&M hadn't hedged all the purchase costs, which weighed on the gross margin.

However, he said it was positive that clothes sold on price discounts were at the same level as last year.

Shares in H&M fell by 4.9 percent to 312 kronor ($38.55) in Stockholm.

The company said it plans to open its first store in Seoul, South Korea, in 2010 and will start franchise operations in Jordan the same year.

The number of H&M stores worldwide reached 1,748 in the first quarter, up from 1,529 in the same period last year.

It said it will continue to expand and plans to open 74 new stores in the second quarter in Germany, France, Britain, Italy, Switzerland and Spain.

Stockholm-based H&M is present in more than 30 countries and employs nearly 55,000 full-time staff.

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On the Net:

Hennes & Mauritz: http://www.hm.com