UPDATE 2-H&M caught out by cold spring weather and strong dollar

Wed Jun 22, 2016 4:53am EDT
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* Q2 pretax profit down 17 pct, meets analyst consensus

* Shares down 0.4 pct, widening discount to Inditex

* Impact of strong dollar set to persist

* High inventories likely to mean more markdowns (Adds details, background)

By Anna Ringstrom

STOCKHOLM, June 22 (Reuters) - Profit at Swedish fashion retailer Hennes & Mauritz fell 17 percent in the second quarter as cold weather hit sales of its spring clothes and a strong dollar increased its costs.

H&M, which buys the bulk of its clothes in Asia on U.S. dollar contracts while selling most of them in Europe, is more exposed to the U.S. currency than Zara owner Inditex which makes more in-house, either in or near Europe.

A strong dollar will have a negative impact on purchasing costs for the third quarter and a neutral effect in the fourth, H&M said on Wednesday. It had previously said the impact could be slightly positive by then.

H&M, which is also facing intensified competition in budget clothing from players such as ABF's Primark, said higher markdowns were mainly due to spring garments not selling as well as planned because of unseasonably cold weather in key markets.   Continued...