Hennes & Mauritz surprises with significant profit increase in third quarter

Swedish apparel group Hennes & Mauritz AB (H&M) posted a surprisingly strong profit increase in the third quarter of its 2025/26 financial year. Sales, however, remained virtually flat compared to the same period last year. This was revealed in an interim report published on Thursday by the parent company of brands including H&M, Cos, Weekday, & Other Stories and Arket.

Sales remain almost unchanged

During the period from June to August, sales reached 57.2 billion Swedish kronor (5.78 billion dollars). This represents a 0.3 percent increase on the same quarter last year. In local currencies, revenue rose by one percent. The company highlighted that it had reduced its global store count by two percent over the past 12 months.

“Our summer collections were well received, contributing to improved sales performance, particularly towards the end of the quarter,” explained CEO Daniel Ervér in a statement. “Simultaneously, sales were impacted by ongoing disruptions in the European logistics network and the global supply chain.”

Sales in the Nordic countries saw positive development, increasing by seven percent (plus 6 percent in local currencies) to 5.6 billion Swedish kronor; in North and South America, revenue grew by three percent (plus 1 percent in local currencies) to 12.5 billion Swedish kronor; and in Asia, Oceania and Africa, sales rose by one percent (plus 4 percent in local currencies) to 6.5 billion Swedish kronor.

Cost-saving measures boost results

In Western Europe, the group's most important market region, sales decreased by two percent (down 1 percent in local currencies) to 19.4 billion Swedish kronor. Revenue in Southern Europe contracted by two percent to 7.8 billion Swedish kronor, although it grew by one percent in local currencies. Sales in Eastern Europe remained largely constant at 5.4 billion Swedish kronor, showing one percent growth in local currencies.

The group significantly boosted its earnings, thanks to an improved gross margin, which rose from 52.9 to 54.0 percent, and lower operating costs. Operating profit grew by 22.9 percent compared to the prior-year quarter to 6.04 billion Swedish kronor, exceeding market expectations. Net profit attributable to shareholders increased by 27.7 percent to 4.12 billion Swedish kronor.

Management warns of earnings impact from more extensive discounts

According to management, September revenue was one percent above the corresponding prior-year level in local currencies. The company warned, however, that the impact on earnings from markdowns in the fourth quarter is expected to be greater than in the same period last year.

Looking ahead to the coming weeks, CEO Ervér expressed confidence. “As we enter the autumn season, our inventory composition is good, and we are well-positioned to meet our customers' needs,” he explained. He added that improvements in the supply chain and the increased use of AI have also enhanced “relevance and precision” across all business areas.