H&M has suffered a slowdown in sales during its crucial Christmas quarter despite pressing ahead with a rapid store expansion programme.

The Swedish fashion giant said revenues excluding VAT during the three months to February 28 slipped 1.7% to Skr46.2bn (£4bn) – below analysts’ expectations.

First-quarter sales dropped despite an increase in its store portfolio from 4,393 to 4,743 year on year.

H&M shares fell 5% in early trading.

The fashion Goliath had warned investors at a Capital Markets Day last month that it expected lower profits this year as it ploughs investment into new concepts and its online operations.

It cautioned that like-for-like sales were “expected to remain negative” during the year, although it predicted a gradual improvement heading into 2019.

H&M boss Karl-Johan Persson acknowledged at the start of February that sales during the year to November 30, 2017 had been “disappointing”, adding that strategic “mistakes” had been made.

He said at the time: “The fashion industry is changing fast. At the heart of the transformation is digitalisation and it is driving the need to transform and rethink faster and faster.”

H&M will post full details of its first-quarter earnings on March 23.