Hennes & Mauritz, the world's second-largest clothing retailer, posed a smaller than expected rise in its first quarter profits citing higher base costs and competitive discounting.

The Sweden-based group, said pre-tax earnings hit 3.7bn Swedish crowns (£350m) while its net income figure for the three months ending in February was 2.74bn Swedish crowns.

H&M earnings miss analysts forecasts as costs rise

The maker of underwear designed by David Beckham said gross margin, a measure of retail profitability, fell 2 percent to 55.8 percent of sales from a year earlier, reflecting a high cost base.

H&M also said sales for the first weeks of March had risen 22 percent from last year, suggesting consumer spending may be starting to turn as Europe's sovereign debt crisis - where H&M has most of its top markets - begins to subside.