Hennes & Mauritz (H&M) will open a new retail format later this year in Stockholm – a single Afound off-price store that will carry a mix of H&M brands and “well known quality” labels, CEO Karl-Johan Persson told analysts.

Afound will be H&M’s ninth format, joining the flagship H&M, H&M Home, Cos, Monki and others. H&M didn’t identify the brands that it will carry outside of its own, but the format is a departure for the fast-fashion retailer, which has relied on its own labels. Afound also is designed as means for selling its own excess inventory, something H&M is in the process of doing though its stores after weak holiday sales, Persson said.

Afound also will have an ecommerce business. “The main thing is to bring something new to the off-price market,” Persson said. And that is “by bringing in a well-created assortment of carefully selected products from a lot of brands, including our own and a lot of well-known brands.”

The new strategy follows H&M’s profit declining 33% to $507 million in Q4 ended Dec. 31 as sales fell 2% to $6.4 billion. In light of the sluggish sales and heightened competition from Internet retailers, H&M is slowing the pace of store openings to short of the 4% annual growth that has been standard in the past, Persson said. It will open 390 locations this year, including new entries into Ukraine and Uruguay, but also close 170 stores, Persson said. The net of 220 new stores is down from 388 last. About a quarter of the new locations will be under banners other than the flagship H&M. H&M also is launching H&M and H&M Home on Alibaba’s Tmall ecommerce site in March.

Contact:

Hennes & Mauritz, Jyrki Tervonen, Chief Financial Officer, +46 8 796 53 00