Key Takeaways
- Second quarter operating profit of SEK 5.91 billion fell short of analyst expectations of SEK 6.38 billion
- Revenue totaled SEK 54.83 billion, below the anticipated SEK 55.25 billion
- Stricter inventory controls limited the retailer’s capacity to satisfy customer demand
- After excluding SEK 679 million in restructuring expenses, adjusted operating profit increased 11% to SEK 6.59 billion
- The company anticipates June sales to remain unchanged year-over-year in local currency terms
Shares of the Swedish fashion retailer H&M declined approximately 2.5% on Thursday following the release of second quarter financial results that missed analyst projections.
H&M reports weaker-than-expected second-quarter earnings, posing a fresh challenge to the retailer’s turnaround efforts https://t.co/nOPepD2wqR
— Bloomberg (@business) June 25, 2026
The company’s operating profit for the three-month period ending in May reached SEK 5.91 billion, falling below the consensus estimate of SEK 6.38 billion. Revenue figures of SEK 54.83 billion similarly trailed expectations of SEK 55.25 billion.
The retailer’s shares were changing hands at 164.40 Swedish crowns, representing a decline of 4.3 crowns during trading.
Chief Executive Daniel Ervér recognized the trade-offs involved in the company’s inventory strategy. “The tighter inventory management has, however, in some cases affected our ability to fully meet demand,” he noted in the company’s statement.
When measured in local currencies, sales remained essentially unchanged compared to the prior year period. The retailer also operated with approximately 3% fewer physical locations at the end of the quarter relative to twelve months earlier.
Understanding the Financial Picture
The shortfall in headline figures was predominantly attributable to non-recurring expenses. The company recorded SEK 679 million in restructuring costs associated with adjustments to its sales markets and central sales organization structure.
When these exceptional items are excluded, adjusted operating profit demonstrated an 11% increase to SEK 6.59 billion, representing a margin of 12% compared to 10.4% in the comparable period. According to Morgan Stanley, this underlying performance exceeded consensus expectations by approximately 3-4%.
The company’s gross margin expanded to 56.6% from 55.4% twelve months prior, surpassing the forecasted 56.5%.
Net income remained stable at SEK 3.96 billion. Earnings per share showed modest growth to SEK 2.49 from SEK 2.48. Operating cash flow demonstrated strong performance, rising 24% to SEK 10.59 billion.
Inventory values decreased 10% year-over-year to SEK 34.94 billion. Adjusted for currency fluctuations, the reduction was 2%.
Looking at the six-month period for 2026, net sales totaled SEK 104.44 billion, down from SEK 112.05 billion in the prior year. Excluding one-time charges, operating profit for the first half grew 14% to SEK 8.10 billion.
Wall Street Perspectives
Morgan Stanley, which maintains an “underweight” rating on H&M with a 120 crown price objective, characterized the quarterly performance as “broadly in line with investor expectations.”
However, the investment bank expressed concerns regarding second-half momentum. It highlighted decelerating constant-currency revenue trends and diminishing benefits from cost reduction initiatives, as efficiency gains from margin improvements and overhead reductions begin to moderate.
The firm also emphasized that technology spending is scheduled to accelerate in the latter half of the year, while elevated raw material and freight expenses continue to present challenges.
The retailer indicated that markdown activity in the third quarter should align with year-ago levels. Sales for June, measured in local currency terms, are projected to be flat compared to the previous year.
Throughout the quarter, H&M inaugurated its first location in Rio de Janeiro and relaunched its flagship store on Hamngatan in Stockholm. Looking ahead, the company intends to establish its first presence in Paraguay during the second half of 2026 and enter the Argentine market in 2027.
Get 3 Free Stock Ebooks
Discover top-performing stocks in AI, Crypto, and Technology with expert analysis.
- Top 10 AI Stocks - Leading AI companies
- Top 10 Crypto Stocks - Blockchain leaders
- Top 10 Tech Stocks - Tech giants
