An H&M store in Tokyo.

PARISHennes & Mauritz AB said sales including VAT, converted into Swedish krona, rose 5 percent in the third quarter as steep markdowns weighed on its performance.

Sales for the three months ended Aug. 31 totaled 59.38 billion kronor, or $7.42 billion.

In local currencies, third-quarter sales were up 4 percent, a slightly slower pace than the 5 percent rise in the second quarter.

The Swedish fast-fashion retailer said the summer discounts led to a better inventory position that has helped sales of fall collections.

Analysts expected the recent period of discounting to weigh on profits.

“Key will be the long-term response as the group moves to more local sourcing and faster speed to market — while ramping up the online operation,” said Barclay’s analysts in a note to clients earlier this month, as it cut its target price for the company to 190 Swedish krona from 200 Swedish krona.

International retailers based in Europe are also under scrutiny from analysts looking for clues about how they will weather pressure from a strong euro.

The fast-fashion behemoth had 4,553 stores at the end of the period, compared to 4,135 for the same period last year.

H&M will report details of its financial performance over the first nine months on Sept. 28.