H&M posted a sharp rise in profits in its latest quarterly results, even as sales slipped, underscoring the retailer’s pivot toward margin recovery over aggressive expansion. The Swedish fashion group’s performance reflects the impact of store closures, tighter cost control and improved inventory management at a time when consumer demand remains uneven.
Net sales for the quarter declined to SEK 49.6 billion, down 1 percent in local currencies, as a reduced store base and cautious spending weighed on the top line. H&M operated around 4 percent fewer stores compared to the same period last year, part of an ongoing effort to streamline its global footprint and focus on more productive locations.
Despite the dip in revenue, operating profit rose 26 percent to SEK 1.51 billion. Operating margin improved to 3.0 percent from 2.2 percent a year earlier, supported by stronger gross margins and disciplined cost management across the business.
Gross margin increased to 50.7 percent, driven by lower markdowns, better sourcing and supply chain efficiencies. Inventory levels were also significantly reduced, down 16 percent year-on-year, helping improve stock productivity and limit discounting.
“Good cost control and an improved gross margin contributed to strengthened profitability in a quarter characterised by cautious consumption and large currency translation effects,” said CEO Daniel Ervér.
The company said sales were impacted by store closures and ongoing restructuring, including the phase-out of certain formats such as Monki stores. However, it expects its optimisation programme to begin contributing positively over the full year.
Digital sales continued to play a larger role, accounting for over 30 percent of total revenue, helping offset the decline in physical retail presence.
Looking ahead, H&M indicated that March sales are expected to grow 1 percent in local currencies, though it cautioned that macroeconomic uncertainty and fragile consumer sentiment could continue to weigh on demand.
The results highlight H&M’s ongoing reset, where profitability, efficiency and a leaner store network are taking precedence over top-line expansion.
