Swedish fashion giant Hennes & Mauritz posted higher than expected third-quarter net profits on Wednesday, helped by rising sales, fewer price reductions and a substantially improved gross margin.

However H&M, Europe's largest fashion retailer, warned that new limitations on imports from China may have a negative impact on its gross margin over the short term.

Third-quarter profit after financial items was up 36 per cent to 3.324 billion kronor, from 2.452 billion a year earlier. Sales rose 18 per cent to 15.16 billion kronor from 12.84 billion kronor in the same period last year.

The gross margin for the quarter was 58.7 per cent, up from 56.1 per cent over the same period. The company said part of this improvement was due to improved cost efficiencies in its buying function and through lower quota costs.
"The sales of autumn garments have started well during the quarter," H&M said in a statement.

H&M said it intends to open about 70 stores and to close about 10 in the fourth quarter. Most of the stores will be opened in North America, but 14 will in Germany. On 31 August the company had 1,134 stores worldwide compared with 1,006 on the same date a year earlier.