Hennes & Mauritz Ab Stock Earnings Reports

H&M Group reported a quarter of clear margin improvement but muted sales. Key financials: Q2 operating margin was 12% excluding one-off restructuring costs (one-offs of SEK 679m), gross margin improved to 56.6% (+120 bps year‑on‑year) and inventory fell to 15.8% of sales. Rolling 12‑month operating margin rose to 8.5% (including one‑offs). Management highlighted strong operational efficiency, supplier consolidation and improved stock precision as drivers of margin improvement. Sales were roughly flat year‑on‑year despite a 3% smaller store base, with weakness concentrated in Western Europe and temporary availability problems linked to logistics consolidation. Online sales continue to grow and upgraded/renovated stores show promising uplifts; the company aims to have touched about 25% of stores by year‑end. Strategic actions: removal of a regional management layer to push decisions closer to local markets, further investments in digital infrastructure (ERP/tech) to improve demand matching, and continued proximity sourcing. Guidance/near‑term outlook: management expects gross margin to be in a normalized 54%–55% range (subject to commodity/currency volatility), markdowns for Q3 similar to last year, and SG&A to grow low single digits in local currency for the full year (H2 OpEx pressure from tech rollout). Capital allocation: completed a SEK ~220m buyback in Q2 and continues regular dividends. Balance sheet and leverage remain conservative (net debt/EBITDA within 1–2x). Key risks: continued weak consumer confidence in Western Europe, logistics/availability disruption, and commodity/cotton price volatility with a 6–8 month lag into gross margin.