H&M said its first-half performance in fiscal 2026 showed a clearer improvement in earnings quality, with margins and cash generation strengthening even as revenue slipped. The Swedish fashion retailer reported that H&M profitability improved in the six months, crediting a stronger gross margin, tighter spending discipline and better inventory productivity for the gains.
In the second quarter ended 31 May 2026, net sales fell to SEK 54.83 billion (about $5.62 billion) from SEK 56.71 billion a year earlier. H&M noted that in local currencies, sales were broadly unchanged year on year, even though the group operated roughly 3% fewer stores.
CEO Daniel Erver said the quarter reflected progress on efficiency and margin repair, while acknowledging the topline came in below internal expectations. “Sales in the quarter were somewhat lower than planned, while profitability and the stock-in-trade situation developed well. The profitability improvement and increased inventory productivity are in line with our long-term work to lay the foundations for sustainable and profitable growth,” he added.
Erver also said that tighter stock levels sometimes reduced the company’s ability to fully satisfy demand, but argued there is still room to refine planning and improve precision in inventory allocation. H&M said it plans to begin upgrading its digital infrastructure in the second half of the year, aiming to support faster decision-making, stronger assortment planning and further improvements in inventory management.
Margin expansion offsets softer gross profit
While gross profit in Q2 edged lower to SEK 31.05 billion (about $3.18 billion), the gross margin improved to 56.6% from 55.4%. Selling and administrative expenses declined 1% to SEK 25.13 billion, though the quarter included SEK 679 million in one-off restructuring costs linked to organisational changes.
On an adjusted basis excluding those items, operating profit increased 11% to SEK 6.59 billion, lifting the operating margin to 12% from 10.4%. Reported operating profit was broadly flat at SEK 5.91 billion. Profit after tax was unchanged at SEK 3.96 billion, while operating cash flow rose 24% to SEK 10.59 billion. Inventory fell 10% to SEK 34.94 billion, highlighting the company’s sharper stock control.
First-half results show steadier operating leverage
For the first half of FY26, net sales declined to SEK 104.44 billion (about $10.71 billion), with local-currency sales down 1%. Gross profit rose to SEK 56.18 billion (about $5.76 billion), and the gross margin improved to 53.8% from 52.3%. Operating profit excluding one-time costs advanced 14% to SEK 8.10 billion, while reported operating profit increased to SEK 7.43 billion from SEK 7.12 billion.
Net profit climbed to SEK 4.67 billion (about $479 million), or SEK 2.95 per share, up from SEK 4.54 billion, or SEK 2.85 per share. Operating cash flow increased 15% to SEK 14.62 billion, reinforcing the point that H&M profitability improved even amid softer sales.
H&M said it expects June 2026 sales in local currencies to be broadly in line with the same month last year. The retailer also continued expanding in Latin America, opening its first store in Rio de Janeiro during the quarter. It plans to enter Paraguay in the second half of 2026 and Argentina in 2027.
