H&M has reported improved H1 FY26 profitability despite lower sales, driven by stronger gross margins, disciplined cost control and better inventory management.
Second-quarter net sales fell to SEK 54.83 billion (~$5.62 billion), while underlying operating profit rose 11 per cent.
H1 net profit increased to SEK 4.67 billion (~$479 million).
Daniel Erver, CEO of H&M said that profitability improved through a higher gross margin, operational efficiency and disciplined cost control.
“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,” added Erver.
He further said that tighter inventory management had occasionally limited the company’s ability to fully meet demand, but said H&M sees further opportunities to improve planning and inventory precision.
The company also plans to begin upgrading its digital infrastructure in the second half of the year to support faster decision-making, improved assortment planning and stronger inventory management, H&M said in a press release.
Margins improve despite lower gross profit
The gross profit edged down to SEK 31.05 billion (~$3.18 billion), while the gross margin improved to 56.6 per cent from 55.4 per cent. Selling and administrative (S&A) expenses declined 1 per cent to SEK 25.13 billion, although the quarter included SEK 679 million in one-time restructuring costs related to organisational changes.
Excluding these costs, operating profit rose 11 per cent to SEK 6.59 billion, lifting the operating margin to 12 per cent from 10.4 per cent. Reported operating profit remained broadly unchanged at SEK 5.91 billion.
The second-quarter profit after tax was SEK 3.96 billion, compared with SEK 3.96 billion a year earlier, while cash flow from operating activities increased 24 per cent to SEK 10.59 billion. Inventory declined 10 per cent to SEK 34.94 billion, reflecting improved stock efficiency.
Operating profit rises as efficiency improves in 6-months
For the first six months (6 months) or first half (H1) of FY26, net sales decreased to SEK 104.44 billion (~$10.71 billion), with local-currency sales down 1 per cent. Gross profit reached SEK 56.18 billion (~$5.76 billion), raising the gross margin to 53.8 per cent from 52.3 per cent. Operating profit excluding one-time costs increased 14 per cent to SEK 8.10 billion, while reported operating profit rose to SEK 7.43 billion from SEK 7.12 billion.
The net profit increased to SEK 4.67 billion (~$479.0 million), or SEK 2.95 per share, from SEK 4.54 billion, or SEK 2.85 per share. Operating cash flow grew 15 per cent to SEK 14.62 billion.
The retailer expects June 2026 sales in local currencies to be on par with the same month last year. H&M also continued its Latin American expansion, opening its first store in Rio de Janeiro during the quarter, with plans to enter Paraguay in the second half of 2026 and Argentina in 2027.
Fibre2Fashion News Desk (SG)
