Why Did H&M Experience a Decline in Quarterly Net Sales?

New Delhi, June 26 (NationPress) The Swedish fashion powerhouse H&M disclosed its Q2 results for the quarter ending May 31, revealing a significant drop in net sales to SEK 56,714 million, down from SEK 59,605 million year-over-year.

This downturn was largely influenced by currency translation effects, as the appreciation of the Swedish krona negatively impacted earnings, despite a modest 1 percent growth in local currency sales.

H&M indicated that the adverse currency effects reduced reported net sales by approximately 6 percentage points.

Additionally, the company operated with 4 percent fewer stores compared to the same period last year. However, if we exclude these closures, sales in local currencies rose by 3 percent.

The gross profit for this quarter totaled SEK 31,425 million, a decline from SEK 33,569 million the previous year.

Furthermore, the gross margin decreased to 55.4 percent, down from 56.3 percent, which the company attributed to higher purchasing costs driven by a stronger US dollar and increased freight charges.

Investments aimed at enhancing customer experience also contributed to the cost pressures. However, H&M anticipates these external cost factors may improve in the latter half of the year.

Operating profit fell to SEK 5,914 million from SEK 7,098 million, leading to a reduction in the operating margin to 10.4 percent from 11.9 percent.

After-tax profit was reported at SEK 3,962 million, compared to SEK 5,064 million from the same quarter last year. Earnings per share also dropped to SEK 2.48 from SEK 3.15.

Cash flow from operating activities decreased to SEK 8,528 million from SEK 12,600 million year-over-year.

The company’s cash and undrawn credit facilities stood at SEK 35,828 million, down from SEK 42,572 million.

For the first half of the year (December 1, 2024 -- May 31, 2025), net sales in local currencies increased by 1 percent, but fell when converted to SEK, dropping to SEK 112,047 million from SEK 113,274 million.

H&M's gross profit for this half-year period was SEK 58,594 million, down from SEK 61,224 million, with the gross margin declining to 52.3 percent from 54.0 percent.

The operating profit for the first six months fell to SEK 7,117 million, compared to SEK 9,175 million last year.

Post-tax profit decreased to SEK 4,541 million from SEK 6,295 million. Cash flow from operating profit stood at SEK 12,729 million, down from SEK 16,567 million.

Looking ahead, H&M projects a 3 percent increase in sales for June 2025 in local currencies, although calendar variances are expected to slightly dampen this growth.

In a positive turn, the environmental group Stand.earth recognized H&M as the leading company in the fashion sector for its commitment to reducing fossil fuel usage.

The company is also gearing up to enter the Brazilian market, with plans for new stores and online operations set to launch in the latter half of 2025.

In addition, the board has approved a buyback of up to 1.1 million of its own class B shares, with a maximum total of SEK 175 million.

This buyback is designed to support the company's long-term incentive program and to adjust its capital structure.

CEO Daniel Erver emphasized that H&M's ongoing dedication to enhancing its product range, shopping experience, and brand continues to yield positive results.

He also noted that advancements in online sales, womenswear, and the H&M Move segment, along with effective cost management, will contribute to profitable growth in the future.