H&M’s revenue in local currencies fell by 1% compared with the same period last year, while analysts had expected flat growth, according to Bloomberg. Operating profit came in at 5.91 billion Swedish kronor (about 610 million U.S. dollars), compared with a forecast of 6.3 billion kronor. Following the release of the earnings report, the company’s shares fell by more than 5% during trading but later partially recovered their losses. Since the beginning of the year, H&M’s shares have fallen by approximately 9%.
CEO Daniel Erver stated that the quarterly results fell short of H&M’s own expectations. According to him, sales remain below target levels, and supply chain disruptions have limited sales in the women’s apparel segment—one of the company’s key business areas, where it had hoped to respond more quickly to changes in fashion trends.
H&M maintained its full-year forecast but warned that consumer activity in Western Europe—one of its key markets—remains weak. The weakening of the U.S. dollar partially offsets rising costs, but air freight and fuel surcharges continue to increase.
The financial results were also impacted by one-time restructuring costs of 679 million Swedish kronor. These costs are related to streamlining management levels, optimizing online operations, and reducing the number of suppliers. Excluding these costs, operating profit rose 11% to 6.59 billion kronor, and the operating margin increased from 10.4% to 12%.
According to analysts at Jefferies, H&M has managed to maintain profitability through strict cost control. A positive sign was the 10% year-over-year reduction in inventory, which lowers the risk of large-scale clearance sales. At the same time, revenue excluding currency effects remained virtually unchanged, indicating a lack of a noticeable recovery in consumer demand.
Competitive pressure on the company persists. H&M continues to compete with Shein, Primark, and Inditex, which bring new collections to market faster and manage their supply chains more efficiently. At the same time, the popularity of ultra-fast fashion and clothing resale platforms is growing, changing consumer behavior. Despite improvements in business efficiency, investors remain skeptical that the company will be able to translate improved profitability into sustainable revenue growth.
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