H&M operating profit jumps 23% as sales inch up

H&M Group’s third-quarter profitability improved faster than sales, as tighter purchasing and lower operating costs helped offset a smaller store base and supply disruption.

Summary of results:

• Third-quarter net sales reached SEK57.19 billion (£4.35 billion), up 1% in local currencies despite H&M operating around 2% fewer stores.
• Operating profit increased 23% to SEK6.04 billion (£460 million), with the operating margin rising from 8.6% to 10.6%.
• Supply-chain disruption raised goods in transit, while H&M expects September sales to increase 1% in local currencies.

H&M generated net sales of SEK57.19 billion (£4.35 billion) during the three months to 31 August, despite trading with around 2% fewer stores at the end of the quarter. Still, the sales marked a slight increase compared with a year earlier, up from SEK57.02 billion (£4.34 billion).

The group operated 4,038 stores at the end of May, 128 fewer than a year earlier. It plans to open around 90 stores and close approximately 170 during 2026, with most openings directed towards growth markets.

Gross profit increased to SEK30.87 billion (£2.35 billion) from SEK30.14 billion (£2.29 billion), lifting gross margin to 54% from 52.9%, which exceeded analyst expectations. The result included a positive one-off effect of around 1.6 percentage points relating to tariffs and imported goods that had increased cost of sales in previous quarters.

Selling and administrative expenses declined 1% to SEK24.83 billion (£1.89 billion). Operating profit rose 23% to SEK6.04 billion (£0.46 billion), beating the the SEK5.14 billion (£390 million) mean analyst forecast in an LSEG poll, while profit after tax increased 28% to SEK4.10 billion (£310 million).

Daniel Ervér, CEO of H&M Group, said: “Although sales developed in a positive direction during the quarter, we see further potential to increase sales going forward.”

For the nine months to 31 August, net sales declined to SEK161.62 billion (£12.29 billion) from SEK169.06 billion (£12.86 billion) but remained flat in local currencies. Operating profit increased to SEK13.46 billion (£1.02 billion) from SEK12.03 billion (£910 million), extending the profitability improvement reported in H&M’s first-half results.

Nine-month operating margin rose to 8.3% from 7.1%, while profit after tax increased to SEK8.77 billion (£670 million).

Supply disruption increases inventory

H&M said its summer collections supported stronger sales towards the end of the quarter, but disruption to European logistics and global supply chains constrained performance.

Stock-in-trade increased to SEK39.36 billion (£2.99 billion) from SEK37.94 billion (£2.88 billion), reflecting a higher value of goods in transit and temporary effects from the consolidation of H&M’s European logistics network. H&M said its inventory composition remained good.

H&M also said that it was raising the proportion of in-season purchasing to respond faster to demand and is investing in digital infrastructure to improve decisions across product development, allocation and sales, while moving more decisions closer to individual markets.

The company's approach to get closer to customers was reflected in it joining London Fashion Week. In September, H&M staged a see-now, buy-now show, making the first drop of its Autumn 2026 womenswear collection and its Atelier menswear collection available online that evening.

H&M has warned about potential UK job cuts

The latest results follow H&M's August announcement that approximately 250 employees in its UK support offices were affected by a proposed reorganisation and consultation process that could result in job cuts.

The company stressed that the figure of 250 refers to the number of employees who received the communication, rather than the number of roles expected to be affected.

It has so far not disclosed a proposed redundancy figure, as the consultation process is still ongoing.

The UK consultation forms part of organisational changes across H&M’s sales markets and central sales organisation. The company said it has reduced complexity and moved decision-making closer to customers, with the aim of responding more quickly to demand in individual markets.