Swedish retail giant H&M reported a promising surge in demand as summer approaches, resulting in a notable uptick in its stock prices. On Thursday, the company announced a 3% increase in June sales, measured in local currencies, following a sluggish start to the year. By 8:40 a.m. London time, shares had risen by 6.4%.
Despite the positive sales outlook, H&M’s CEO Daniel Erver cautioned about the prevailing uncertainty among consumers, highlighting increasing price sensitivity. He noted that while the retailer is closely monitoring the impact of U.S. trade tariffs, it may have to consider raising prices to offset rising costs. “We are starting to see some competitors increasing prices, and this is something we are, of course, looking into to ensure we remain competitive,” Erver stated during an earnings call.
The U.S. remains H&M’s second-largest market, with significant reliance on production in Asian countries like China and Bangladesh. Erver acknowledged the importance of the U.S. market and anticipated that the effects of tariffs would become clearer in July when a 90-day levy pause concludes. H&M expressed confidence in its supply chain flexibility, stating, “With good flexibility in the supply chain and through the pricing of the customer offering, there are opportunities to adapt the business to changed conditions.”
These developments come in the wake of disappointing fiscal second-quarter sales, which dipped to 56.71 billion Swedish krona (approximately $5.99 billion) from the previous year, slightly below analyst expectations. In local currencies, sales saw a modest rise of 1%. The company’s operational profit stood at 5.9 billion Swedish krona, matching market expectations, but still fell short compared to the previous year.
H&M indicated that external factors like a stronger U.S. dollar and increased freight costs negatively impacted purchasing costs in the first half of the year. However, Erver expressed optimism, stating that “the negative external factors that increased the costs of purchasing for the first half of the year are turning positive for the second half.”
Looking ahead, H&M outlined plans for the future, flagging 200 store closures by 2025 in more established markets while simultaneously pursuing 80 new openings in emerging markets. Although the company had previously reported sluggish sales at the start of the year, it acknowledged an annual improvement in sales figures starting in March.
The retail landscape remains challenging for H&M, as it grapples with several consecutive quarters of lower sales, struggling to keep pace with competitors like Zara, owned by Inditex, and budget-friendly brands such as Shein and Temu. Broader challenges in the retail sector, including U.S. tariffs and waning consumer confidence, have contributed to sluggish sales trends, echoing Inditex’s recent quarterly performance, which also fell short of expectations amidst economic uncertainty.
Recent findings from law firm Weil, Gotshal & Manges LLP have further illuminated the retail and consumer goods sector’s struggles across Europe, pinpointing tight credit conditions, rising costs, and decreased consumer demand as significant pressures affecting the industry.
As H&M navigates this challenging environment, its ability to adapt to evolving market conditions will be crucial for sustaining growth moving forward.
Original Source: https://www.cnbc.com/2025/06/26/hm-hmb-earnings-q2-fy25.html
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Publish Date: 2025-06-26 13:20:00
