H&M's Quarterly Net Sales Dip Despite Local Currency Growth; Eyes Brazil Expansion and Share Buyback
New Delhi(The Uttam Hindu): Swedish fashion giant H&M on Thursday posted weaker results for its quarter ending May 31 (Q2), with net sales falling to SEK (Swedish Krona) 56,714 million from SEK 59,605 million in the same period a year earlier. The decline was primarily due to currency translation effects, as a stronger Swedish krona impacted earnings despite a modest 1 per cent growth in sales in local currencies.
According to H&M, the negative currency impact shaved off around 6 percentage points from reported net sales. The company also operated with 4 per cent fewer stores compared to the same period previous year. However, excluding those closures, local currency sales rose by 3 per cent. H&M’s gross profit for the quarter stood at SEK 31,425 million, down from SEK 33,569 million previous year.
The gross margin slipped to 55.4 per cent from 56.3 per cent. The company attributed this decline to higher purchasing costs, mainly driven by a stronger US dollar and increased freight charges. Investments in improving the customer experience also added to the cost pressure. However, the company expects these external cost factors to turn favourable in the second half of the year. Operating profit fell to SEK 5,914 million from SEK 7,098 million, reducing the operating margin to 10.4 per cent from 11.9 per cent.
After-tax profit came in at SEK 3,962 million, compared to SEK 5,064 million in the same quarter previous year. Earnings per share declined to SEK 2.48 from SEK 3.15. Cash flow from operating activities also dropped, coming in at SEK 8,528 million versus SEK 12,600 million in the year-ago quarter. The company’s cash and undrawn credit facilities stood at SEK 35,828 million, down from SEK 42,572 million.
For the full half-year period (December 1, 2024 -- May 31, 2025), net sales in local currencies rose by 1 per cent, but again fell when converted to SEK -- dropping to SEK 112,047 million from SEK 113,274 million. The company’s gross profit for the half-year came in at SEK 58,594 million, down from SEK 61,224 million, with the gross margin falling to 52.3 per cent from 54.0 per cent. The operating profit for the first six months declined to SEK 7,117 million, compared to SEK 9,175 million a year ago.
The result after tax fell to SEK 4,541 million from SEK 6,295 million. Cash flow 0from operating profit stood at SEK 12,729 million, down from SEK 16,567 million. Looking ahead, H&M expects its sales in June 2025 to rise by 3 per cent in local currencies, though the company noted that calendar differences will slightly reduce this growth. In a positive development, environmental group Stand.earth rated H&M as the top company in the fashion sector for its efforts to reduce fossil fuel use.
The company is also preparing to enter the Brazilian market, with new stores and online operations set to launch in the second half of 2025. Meanwhile, the board has decided to buy back up to 1.1 million of its own class B shares, for a maximum total of SEK 175 million. This buyback aims to support the company’s long-term incentive program and adjust its capital structure. CEO Daniel Erver said that H&M’s ongoing focus on its product range, shopping experience, and brand continues to show results. He added that improvements in online sales, womenswear, and the H&M Move segment, combined with cost control, will support profitable growth going forward.