H&M shares fall after a quarter that fell short of expectations, weighed down by restructuring costs

  (Il Sole 24 Ore Radiocor) - H&M stumbles as its second-quarter results fall short of expectations, weighed down by one-off restructuring costs, and its share price suffers on the stock market. The fast-fashion chain reported a 3.3 per cent fall in turnover to 54.83 billion Swedish kronor in the second quarter (1 March – 31 May), below analysts’ expectations of 55.3 billion. In local currencies, the decline was 1%. Operating profit stood at 5.91 billion, unchanged from the previous year and below the consensus estimate of 6.47 billion. Net profit of 3.96 billion kronor (approximately 358 million euros) was broadly stable compared with the same period last year. The group notes that operating profit for the period, net of one-off costs, stood at 6.59 billion kronor, up 11%. The gross margin also rose to 56.6%, compared with 55.4% the previous year.

For the month of June, H&M expects sales to remain stable compared with the same period in 2025. The group has stated that it has set aside provisions totalling 1.24 billion Swedish kronor during the quarter, including 679 million “for the implementation of organisational changes in the sales markets and within the central sales organisation, and 568 million for transition costs in operational activities, including changes to the management of, amongst other things, the brands in the portfolio, technology and logistics”. During the quarter, “sales were slightly lower than we had anticipated, whilst profitability and the stock situation developed well”, said CEO Daniel Erver in a statement, emphasising that efforts to improve stock management had contributed to profitability. “This more rigorous stock management has, however, in some cases, affected our ability to fully meet demand”, the CEO explained in a statement, adding that the group believes “there is potential to further improve accuracy, in order to strike a better balance between availability and demand”.

H&M has reported a positive second quarter, but a difficult third quarter is on the horizon, according to analysts at Bernstein, citing indications of stable sales in June. “We believe this is a modest figure, given the marked improvement in weather conditions across Europe in June, and the consensus forecast of +1.8 per cent will likely need to be revised downwards,” Bernstein adds. The main challenge for the second half of the year is that growth remains a distant prospect and margin expansion has already largely benefited from measures aimed at improving the supply chain, the US bank’s experts also point out, highlighting the need for “further strategic initiatives to boost both turnover and net profit”.

According to analysts at RBC Capital Markets, the quarter’s performance was mixed, with sales slightly below expectations, whilst the gross margin was broadly in line with forecasts. Furthermore, adjusted EBIT of 6.6 billion kronor exceeded the consensus estimate of 6.3 billion. However, the group expects June sales, on a constant-currency basis, to remain stable compared with the previous year, whilst RBC had anticipated growth of 1 per cent. The second-quarter results of clothing giant H&M showed adjusted operating profit exceeding SB1 Markets’ forecasts and consensus expectations, excluding restructuring costs. The research firm highlighted the improvement in gross margin, effective cost control and the strengthening of operating cash flow. However, the stagnation in local-currency sales in June was deemed disappointing and suggests that the sales trend has not yet reversed. SB1 Markets therefore expects a downward revision to full-year operating profit forecasts, mainly due to lower sales assumptions.