H Reports 40% Increase in Operating Profit Amid Store Optimization Strategy

What's Happening?

H&M has announced a 40% rise in its operating profit for the third quarter of the 2025 financial year, attributed to improved customer offerings, enhanced gross margins, and effective cost management. The Swedish fashion group reported an operating profit of 4.91 billion Swedish kronor, with a margin increase from 5.9% to 8.6%. Despite a 3% decrease in sales when converted to SEK due to currency translation effects, local currency sales rose by 2%. The company has reduced its number of stores by 4% as part of a store optimization strategy aimed at long-term profitability. A notable development was the opening of H&M's first store in Brazil, which received positive customer feedback.

Why It's Important?

The increase in H&M's operating profit highlights the effectiveness of its strategic initiatives, including store optimization and improved customer offerings. This financial growth is significant for the fast fashion industry, which faces challenges such as labor exploitation and environmental concerns. H&M's ability to enhance profitability despite reducing store numbers suggests a shift towards more sustainable and profitable business practices. The positive reception of the new store in Brazil indicates potential for expansion in emerging markets, which could further bolster the company's global presence and financial performance.

What's Next?

H&M plans to continue its store optimization strategy, potentially opening more profitable locations while closing less successful ones. The company is also focusing on improving its supply chain and cost management to sustain its financial growth. As the autumn collections have been well received, H&M expects sales in September 2025 to match those of the previous year, despite high comparative figures. The ongoing strategy may lead to further expansion in emerging markets, contributing to long-term profitability and market presence.