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Sandra Halliday Published
March 27, 2025
H&M Group’s Q1 report on Thursday showed the Swedish fashion retail giant’s sales continue to rise, although the percentages remain relatively low. March sales look sluggish too but the firm remains upbeat.
Net sales in the three months to the end of February increased by 3% to SEK55.333 billion (€5bn/£4.3bn/$5.5bn). In local currencies net sales increased by 2% with around 3% fewer stores compared with the previous year. The local currency sales rise was below expectations.
Gross profit at the firm that also owns Cos, & Other Stories, Arket and more dipped to SEK27.169 billion from SEK 27.655 billion, for a gross margin of 49.1%, down from 51.5%. The gross margin for the quarter was affected by “negative external factors, increased markdowns and investments in the customer offering”.
The Swedish krona strengthened in the quarter, with the result that currency re-measurement effects also negatively affected the gross margin compared with the previous year.
Selling and administrative expenses rose too, although they were flat in local currencies.
Operating profit plunged to a below-expectations SEK1.2 billion from SEK2 billion as the operating margin dropped to 2.2% from 3.9%, attributable to the lower gross margin. Profit after tax was down to SEK579 million from SEK1.231 billion.
CEO Daniel Ervér said sales development was “good in western, southern and eastern Europe, with positive development in Germany and Poland”. Online sales continued to develop well too, “which shows that customers appreciate our upgraded digital store”.
He added that the business is continuing to optimise the store portfolio by closing select stores: “We went into the quarter with nearly 120 fewer stores compared to the same time last year and we had 40 net store closures during the period.”
But highlighting the sluggish sales growth and the profitability issues, he said: “We made important progress in our plan and have good cost control [yet] our sales and earnings in the quarter were somewhat weaker than planned. But the first quarter is the smallest quarter of the year for us in terms of sales and margin, and we are confident going forward.
“We can see that the improvements we have made, especially in the women’s assortment, are starting to have a positive effect. Here we have simplified the organisation and become faster at adapting to new trends and creating a more relevant assortment. During the year we are implementing similar improvements for all our customer groups.”
Through its omni-model, the group is continuing to integrate the physical and digital sales channels, “making it easier for our customers to find what they are looking for,” he said. “The upgraded digital store was rolled out to more markets in the quarter and has been well received by our customers. Upgrades to our physical stores continues to be given high priority. In addition to rebuilds of key stores in several major cities, we are expanding customer experience upgrades to more stores in more markets during the year”.
He also explained that the business has “a stable financial position that gives us the flexibility to prioritise what creates the most value for our customers”.
So what about numbers for the period since the quarter ended and the picture for the rest of the year? The group’s sales for March are expected to increase by just 1% in local currencies year on year.
But the company said that the “overall negative effect from external factors, increased markdowns and investments in the customer offering is estimated to already be significantly smaller in the second quarter than in the first quarter, while collaboration with strategic suppliers is being deepened and bringing additional positive effects. At present the conditions are in place for these to have a positive overall effect in the second half of the year compared with the previous year, with the customer offering being strengthened at the same time”.