Hennes & Mauritz, the world's second-largest fashion retailer, posted a bigger than expected rise in second-quarter pretax profit on Wednesday and said its newest collections had been well received despite tough macro-economic conditions.

Photo: H&M

Pretax earnings reached 7.1 billion Swedish crowns ($1 billion), compared with a year-ago 5.8 billion and a mean forecast in a Reuters poll of analysts for 6.6 billion.

"The year started well and the positive trend continued in the second quarter," Chief Executive Karl-Johan Persson said in a statement.

"The spring collections have been well received by our customers as shown by our increased market share in a fashion retail market that continues to be challenging," Persson added.

The gross margin was unchanged at 61.7 percent, topping a consensus forecast for 61.1 percent.

Fast-expanding H&M, which has around 2,500 stores in 44 markets and the bulk of i ts b usiness in Europe, said the e ffects of earlier significantly negative external factors, such as cotton prices, h ad been mor e or less neutralised.

"In addition, for purchases made for the second quarter, the U.S. dollar was relatively neutral, but will become negative for purchases for the second half-year," it said.

Markdowns in relation to sales were unchanged from a year earlier, it added.

H&M, which is expanding in China, the Unites States and Russia and plans to enter five new markets, said it remained positive on prospects for continued expansion.

It said it s inventory level, which was up 8 percent year-on-year at the end of the quarter, w as g ood, showing few signs it was worried about having an overhang of stock.