H&M reported disappointing sales, posing a fresh challenge to the Swedish fast-fashion retailer’s turnaround efforts amid intense competition and cautious consumer spending.
Revenue in local currencies in the second quarter fell 3 per cent, compared with expectations for flat growth. H&M said sales in June are expected to be on par with the same month the previous year.
The company’s shares slid as much as 5.2 per cent in Stockholm. The stock had fallen about 9.3 per cent this year through Wednesday’s close. That compares with a decline of just under 1 per cent in Zara owner Inditex’s shares.
Chief executive Daniel Ervér’s efforts to revive growth have come under increasing scrutiny after years of uneven performance. While investors have welcomed recent improvements in margins – supported by leaner inventory levels and stronger full-price sales – the focus has shifted to whether the retailer can restore consistent top-line growth. On a call Thursday morning the CEO said the company’s sales are “still not where we want them to be.”
“When looking at sales across the board, we are not satisfied,” Ervér said. “We had plans for having stronger sales in this quarter,” but even womenswear, where H&M had pushed for greater flexibility and better trend detection, was “affected by some supply gaps,” he said.
While the company maintained its financial outlook for the year, it signalled signs of weak consumer sentiment in regions like western Europe, a key market for H&M’s womenswear. Although the weak dollar is providing some tailwinds, H&M said it expects higher transport costs, mainly related to elevated spot prices for airfreight and fuel surcharges.
Since taking over in 2024, Ervér has worked to improve H&M’s product offerings, sharpen pricing and shorten lead times as part of a broader turnaround strategy. Those efforts have helped margins recover, but demand remains fragile in several key markets.
In the three months through May, H&M posted operating profit of 5.91 billion kronor (€573 million), missing analysts’ average estimate of 6.3 billion kronor in a Bloomberg survey.
The results were dented by one-time costs of 679 million kronor related to organisational changes linked to whittling away layers to take decisions faster, cutting back on online sales structures and streamlining the number of suppliers. Excluding those costs, operating profit increased by 11 per cent to 6.59 billion kronor, corresponding to a margin of 12 per cent – an improvement from 10.4 per cent in the same quarter last year.
Jefferies analysts led by James Grzinic said the results confirm the extent to which the company’s operational discipline is helping to “offset a lack of top-line progress. Inventory control is even more impressive and de-risks markdown pressures.”
Inventory fell 10 per cent year-on-year despite broadly flat underlying sales, reducing the risk that H&M will have to discount heavily to clear excess stock later in the season. Still, revenue excluding currency effects was essentially flat, showing little evidence of improving consumer demand.
H&M faces mounting pressure from low-cost rivals including Shein and Primark, as well as Inditex, whose faster product cycles and more responsive supply chain have allowed it to outperform much of the apparel sector. H&M is also grappling with changing consumer behaviour as shoppers increasingly turn to ultra-fast-fashion platforms and second-hand marketplaces. – Bloomberg
