H & M Hennes & Mauritz Ab (publ) Stock Earnings Reports

H&M reported a mixed quarter with improving profitability despite weak underlying demand and significant currency headwinds. Key points: sales were down 1% in local currency (and further impacted by ~9ppt currency translation), but gross margin improved to 50.7% and operating margin to 3.0% (rolling 12-month operating margin 8.4% vs 7.0% a year ago). Management attributes margin improvement mainly to supply-chain and sourcing improvements, better inventory precision and reduced markdowns, plus tight cost control. Inventory productivity is at a 10-year high versus sales and working capital fell; the company targets long-term inventory of 12–14% of sales. Digital, AI and nearshoring initiatives are being accelerated to increase speed and relevance. H&M reiterates its full-year financial outlook: Q2 external factors expected to be somewhat positive (but with tariff headwinds and geopolitical risks noted), and SG&A is expected to grow low single digits in local currency as platform rollouts increase costs before second-half benefits. Management emphasizes reinvesting any margin upside (target normalized gross margin ~54–55%) into product quality, in-season capability and competitive pricing. Regional notes: U.S. demand has been resilient but supply was prudent going into 2025; South America and Southern Europe showed strength; exposure to the Middle East is small but monitored. Sustainability progress highlighted: Scope 3 emissions down ~34.6% in 2025 and recycled materials now 32% (91% recycled or sustainably sourced).