Meanwhile, net sales for the second quarter (Q2) ended May 31, 2026 fell to SEK 54.83 billion (~$5.62 billion) from SEK 56.71 billion (~$5.82 billion) a year earlier. In local currency, sales were in line with the previous year, despite operating around 3 percent fewer stores.
H&M reported improved profitability in the first half of FY26 despite lower sales, driven by stronger gross margins, disciplined cost control and better inventory management. Second-quarter net sales fell to 54.83 billion Swedish krona (~$5.62 billion), while underlying operating profit rose 11 percent. H1 net profit rose to SEK 4.67 billion (~$479 million).
Daniel Erver, CEO of H&M said profitability improved through higher gross margin, operational efficiency and disciplined cost control.
“Sales in the quarter were somewhat lower than planned, while profitability and the stock situation in the trade evolved well. The improvement in profitability and the increase in inventory productivity are in line with our long-term work to lay the foundations for sustainable and profitable growth,” Erver added.
He also said that tighter inventory management had occasionally limited the company's ability to fully meet demand, but said H&M sees more opportunities to improve inventory planning and accuracy.
The company also plans to start upgrading its digital infrastructure in the second half of the year to support faster decision-making, better assortment planning and stronger inventory management, H&M said in a press release.
Margins improve despite lower gross profit
Gross profit fell to SEK 31.05 billion (~$3.18 billion), while gross margin improved from 55.4% to 56.6%. Selling and administrative (S&A) expenses decreased 1 percent to SEK 25.13 billion, although the quarter included SEK 679 million in one-time restructuring costs related to organizational changes.
Excluding these costs, operating profit rose 11 percent to SEK 6.59 billion, raising operating margin to 12 percent from 10.4 percent. Reported operating profit was virtually unchanged at SEK 5.91 billion.
Second-quarter profit after tax was SEK 3.96 billion, compared to SEK 3.96 billion a year earlier, while cash flow from operating activities increased 24 percent to SEK 10.59 billion. Inventory decreased 10 percent to SEK 34.94 billion, reflecting increased inventory efficiency.
Operating profit increases as efficiency improves in 6 months
For the first six months (6mths) or first half (1H) of FY26, net sales decreased to 104.44 billion Swedish krona (~$10.71 billion), and sales in local currency fell 1 percent. Gross profit reached SEK 56.18 billion (~$5.76 billion), raising gross margin to 53.8 percent from 52.3 percent. Operating profit, excluding one-off costs, rose 14 percent to SEK 8.1 billion, while reported operating profit rose to SEK 7.43 billion from SEK 7.12 billion.
Net profit rose 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 by 15 percent to SEK 14.62 billion.
The retailer expects June 2026 sales in local currency to be on par with the same month last year. H&M also continued its expansion in Latin America, 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.
Fiber2Fashion News Desk (SG)
