H&M profit below estimates turnaround questions remain

H&M AB's earnings were weaker than estimates and posed a fresh challenge to the Swedish retailer's turnaround efforts amid increasing competition as well as cautious consumer spending.

Its operating profit was at 5.91 billion kronor ($610 million), whereas analysts' average estimate was of 6.3 billion kronor, Bloomberg reported.

Sales in local currencies fell 3%, 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.

Still, excluding some one-time costs related to organizational changes, operating profit increased by 11% to 6.59 billion kronor, corresponding to a margin of 12% — an improvement from 10.4% in the same quarter last year.

Chief Executive Officer Daniel Ervér’s efforts to revive growth have come under increasing scrutiny after years of uneven performance. While investors have welcomed recent improvements in profitability — supported by leaner inventory levels and stronger full-price sales — the focus has shifted to whether the retailer can restore consistent top-line growth.

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.

The retailer faces mounting pressure from low-cost rivals including Shein and Primark, as well as Zara owner 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 behavior as shoppers increasingly turn to ultra-fast-fashion platforms and secondhand marketplaces.

The company’s stock has fallen about 9.3% this year through Wednesday’s close. That compares with a decline of just under 1% in Inditex shares.

With inputs from Bloomberg