H&M's sales have stagnated, falling short of market expectations as the Swedish fashion retailer reported 54.8 billion Swedish kronor (£4.2 billion) in revenues for the three months to the end of May. This represents a flat year-on-year performance, contrary to analyst forecasts of stronger growth. The disappointing figures come despite H&M's efforts to streamline its operations and cut costs, which have contributed to an 11 per cent increase in operating profit to 5.9 billion Swedish kronor (£463 million). However, this still falls short of the projected 6.3 billion Swedish kronor (£490 million) anticipated by analysts polled by Bloomberg.
H&M's chief executive, Daniel Erver, acknowledged that sales were "somewhat lower than planned", failing to fully offset a one-off cost of 679 million Swedish kronor (£52 million). A key factor in this shortfall is the company's aggressive drive to tighten its inventory management, aimed at improving efficiency and profitability. While this strategy has had a positive impact on costs, it has also hindered H&M's ability to meet demand, potentially leading to lost sales opportunities.
The retailer's efforts to rebalance its operations are further reflected in its reduced physical footprint, with 163 fewer stores operating at the end of May compared to last year. This forms part of a broader strategy to renovate existing outlets and open new stores in select locations. H&M highlighted that it is "highly affected by external risks linked to industry shifts, changing consumer behaviour, geopolitical tensions, and increased complexity around cybersecurity."
RSM UK analyst Robyn Duffy noted that the results reflect a period significantly impacted by the Middle East crisis and a dip in consumer confidence. However, she also observed that H&M's tighter control over supply chains and costs, alongside favourable currency movements, is "delivering positively for profitability". The challenges faced by H&M underscore the complex environment for high-street retailers grappling with intense competition from online fast-fashion players and evolving consumer habits.