H&M Reports 2% Sales Growth, Misses Expectations Amid Weak Demand

H&M, the world's second-largest clothing retailer, has reported a disappointing start to its fiscal year, with first-quarter sales falling short of expectations. The Swedish fashion giant saw its sales grow by 2% in local currency terms, reaching 553.3 billion Swedish kronor (approximately 55 billion USD), which was below the anticipated 558.6 billion Swedish kronor. This underperformance was largely due to continued weak demand, a persistent challenge for the company.

The company's operating profit for the quarter totaled 12 billion Swedish kronor, significantly below the expected 19 billion Swedish kronor. The operating profit margin stood at 2.2%. H&M attributed the decline in operating profit to "negative external factors, increased discounting, and investments in customer service," which impacted the gross margin. Despite these challenges, the company expressed optimism that these factors would "substantially weaken" in the second quarter and forecasted a 1% year-over-year increase in sales for March.

H&M's CEO, Daniel Erver, acknowledged the shortfall in sales and profits but remained confident about the future. He stated, "Our sales and profits for this quarter were slightly below our plans, but the first quarter is the smallest in terms of sales and profit margins for us throughout the year. We are confident about the future." Erver emphasized the company's focus on strengthening product supply, enhancing the shopping experience, and bolstering brand strength to achieve long-term, profitable, and sustainable growth.

The underwhelming performance comes as H&M continues to face stiff competition from fast-fashion brands like Zara and low-cost retailers such as Shein. The company has struggled to close the widening gap with these competitors and has seen several quarters of weak sales. The latest results serve as a test for Erver, who was appointed CEO in January 2024 with the mandate to accelerate the group's business improvement. Despite the challenges, H&M remains committed to its strategic initiatives aimed at revitalizing its market position and driving sustainable growth.