Swedish multinational clothing retail company H&M recorded fall in its operating profit to Skr5.9bn ($624.3m) for the second quarter ended on 31 May.
The operating margin falling to 10.4% from 11.9%. This decline is primarily due to a reduced gross margin and unfavourable currency exchange impacts.
After-tax profits stood at Skr3.96bn compared to Skr5.06bn previously, resulting in earnings of Skr2.48 per share, a decrease from Skr3.15 per share.
Gross profit for the second quarter of 2025 was Skr31.43bn, resulting in a gross margin of 55.4% compared to 56.3% the previous year.
The margin suffered mainly due to a more expensive US dollar, high freight costs, and the company's investments in enhancing the customer offering. Despite these challenges, the external factors are expected to turn favourable in the second half of the year.
H&M experienced a 1% increase in sales in local currencies, despite operating with 4% fewer stores than the previous year. When excluding store closures, sales saw a 3% rise.
However, when converted to Swedish krona (Skr), net sales decreased to Skr56.71bn from Skr59.61bn, influenced by a strong Skr which had a six percentage point negative currency translation effect.
H&M CEO Daniel Ervér said: “Our plan, with its focus on the product offering, the shopping experience and brand, is again confirmed by the progress we see. The positive development in important areas such as online, H&M womens-wear and H&M Move, as well as continued focus on good cost control, will contribute to a profitable sales development.”
Selling and administrative expenses were Skr25.49bn, a slight increase in local currencies by 2%.
In the first half of the year, net sales were up 1% in local currencies, with Skr112.05bn in net sales. Gross profit was Skr58.59bn, with a gross margin of 52.3%. Operating profit for the half-year was Skr7.12bn, with a margin of 6.4%.
June 2025 sales are expected to increase by 3% in local currencies compared to the same month last year, despite a negative calendar effect.
Ervér added: “In uncertain times with cautious consumers we monitor macroeconomic and geopolitical developments closely and continuously adapt both the customer offering and the business to meet our customers’ needs in the best way.”
H&M is planning to enter the Brazilian market, with both physical and online stores, in the second half of the year.
Portfolio brands, particularly COS, have shown growth, and the company remains focused on improving the product offering and shopping experience. Sustainability efforts have been integrated into operations, yielding recognition from Stand.earth, an environmental organisation.
Ervér added: “With a clear plan, a strong financial position, good cost control and committed employees, we see good opportunities for long-term, sustainable and profitable growth.”
