On March 27, Swedish fashion giant H&M released its earnings report for the first quarter of fiscal year 2025 (December 1, 2024 – February 28, 2025), revealing that although sales showed steady growth, the company fell short of market expectations. This performance appears to reflect ongoing sluggish demand and intensified competition in the fast fashion industry.
The group’s total net sales rose by 3% year-over-year to SEK 55.333 billion (approximately USD 5.5 billion). In local currencies, sales increased by 2%, slightly below analysts’ expectations of SEK 55.86 billion. Despite a roughly 3% year-over-year decrease in store count, H&M reported stable performance in its online sales for the quarter.
However, operating profit saw a steep decline, dropping from SEK 2.077 billion in the previous year to SEK 1.203 billion. The operating margin decreased from 3.9% to 2.2%. The gross margin fell from 51.5% to 49.1%, mainly due to “negative external factors, increased markdowns, and investments in the customer offering.” In addition, currency remeasurement losses caused by a stronger Swedish krona further weighed on profitability.
CEO Daniel Ervér commented on regional performance, stating, “We saw sales growth in Western, Southern, and Eastern Europe, with particularly strong performance in Germany and Poland.” Regarding online sales, he added, “The upgraded digital store has been well received and shows that it’s appreciated by our customers.”
Ervér also noted, “Our sales and earnings in the quarter were somewhat weaker than planned – but the first quarter is the smallest quarter of the year for us in terms of sales and margin. We are confident going forward.” He continued, “Our main priorities are a strengthened product offering, a more inspiring shopping experience and a stronger brand. Through this we create the conditions for long-term, profitable and sustainable growth.”
Looking ahead, H&M expects sales in March 2025 to increase by 1% year-over-year in local currencies. The company also stated that “the overall negative effect from external factors, increased markdowns and investments in the customer offering is estimated to already be significantly smaller in the second quarter.” It is also deepening its collaboration with strategic suppliers, which is expected to yield further positive results.
In recent years, competition in the fast fashion industry has intensified. Rival companies are also undergoing major changes. For instance, U.S. fashion retailer Forever 21 recently filed for Chapter 11 bankruptcy and plans to close over 200 stores across the country. If it cannot find buyers for the remaining stores, the entire chain—estimated at 350 locations—may be liquidated. H&M is also facing stiff competition from global players such as Zara, owned by Spain’s Inditex, and Chinese fast fashion giant Shein, both of which are aggressively expanding their market share.
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