H&M operating profit improves but sales still sluggish

STOCKHOLM, Sept 24 — Swedish fashion retailer H&M on Thursday ​reported a stronger-than-expected third-quarter operating profit as CEO Daniel Erver said his push to control costs and make sourcing more efficient was bearing ‌fruit.

Since Erver became CEO in January 2024, H&M's profitability has improved, but investors are still waiting for ⁠signs he can boost sales growth ​in the face of fierce competition ⁠from Shein and Zara owner Inditex.

Operating profit in H&M's fiscal third quarter increased ‌to 6.04 billion ‌Swedish crowns ($608.63 million) from 4.91 billion crowns a year earlier and ⁠compared with a mean forecast of 5.14 ⁠billion crowns in an LSEG poll of analysts.

H&M's gross profit margin widened to 54.0% in the quarter, from 52.9% a year earlier, thanks in part to tariff refunds. Analysts had expected a margin of 53.4%.

Sales were still sluggish, though, with H&M saying sales in September would rise by ‌1% in local currencies — the same growth rate ​as the June-August quarter. H&M shares were down 2% at the open.

"They are still struggling to lift sales growth," said Inderes analyst Lucas Mattsson, adding that profit was "relatively in line" with the markets' expectations adjusted for the tariff refund effects.

H&M is increasing the share of clothes it buys in-season as it tries to react faster to fashion trends and increasingly unpredictable ​weather.

But inventories were up 9% in currency-adjusted terms in the quarter, which H&M ‌said was due to ‌disruption ⁠in global supply chains.

The retailer is also investing in logistics as online sales grow, and said it would gradually start using new warehouses in Europe this year and next to improve its capacity and product availability.

Meanwhile, the billionaire heirs of H&M ‌founder Erling Persson have been ​quietly increasing their stake, fuelling speculation they ‌could eventually take the ⁠group private.

($1 = 9.9239 ​Swedish crowns)

(Reporting by Greta Rosen Fondahn and Helen Reid. Editing by Terje Solsvik and ​Mark Potter)

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