Swedish clothing company H&M Hennes & Mauritz AB reported net sales of SEK 55,333 million (~$5.26 billion) for the first quarter (Q1) of fiscal 2025 (FY25), which ended on February 28, 2025. This marks a 3% year-over-year (YoY) increase. In local currencies, net sales also rose by 2%, despite operating about 3% fewer stores compared to the previous year.
H&M’s sales performance was robust across Western, Southern, and Eastern Europe, with especially strong growth in Germany and Poland. The company’s online sales continued to thrive, indicating that customers appreciate the upgraded digital store.
In Q1 FY25, H&M’s gross profit reached SEK 27,169 million (~$2.58 billion), although profitability faced challenges due to a weaker gross margin of 49.1%. This decline was driven by negative external factors, increased markdowns, and investments in enhancing the customer offering. Additionally, the strengthening of the Swedish krona during the quarter negatively impacted the gross margin through currency remeasurement effects. However, the company anticipates that these negative effects will be significantly less pronounced in the second quarter (Q2).
Selling and administrative expenses totaled SEK 25,938 million (~$2.46 billion), leading to an operating profit of SEK 1,203 million with an operating margin of 2.2%. The cash flow from operating activities improved to SEK 4,201 million.
The company noted that extended transport times related to the situation in the Red Sea continued to affect inventory levels. Despite this, H&M assessed the composition of its stock-in-trade as good.
Looking ahead to March 2025, H&M expects sales in local currencies to increase by 1% compared to the same month last year. The adverse impact from external factors, higher markdowns, and investments in customer offerings appears to be diminishing in Q2.
H&M has made significant strides with its strategic plan, maintaining solid cost control. Although sales and earnings for the quarter were slightly below expectations, the company remains optimistic due to the typically smaller performance of Q1 in terms of sales and margin.
The group is committed to integrating its physical and digital sales channels through its omni-model. The upgraded digital store, which launched in additional markets during the quarter, has received positive feedback from customers. Enhancements to physical stores remain a priority, with key store rebuilds underway in major cities and plans for expanded customer experience improvements across more markets.
“We have a stable financial position that gives us the flexibility to prioritize what creates the most value for our customers,” stated Daniel Erver, CEO of H&M. “With macroeconomic and geopolitical uncertainty, it is important that we continue to focus fully on our plan and offer the best combination of fashion, quality, price, and sustainability for everyone. We are therefore further strengthening our customer offering through an upgraded product range, a more inspiring shopping experience, and a stronger brand. This creates the conditions for long-term profitable and sustainable growth, with the H&M brand and organic growth in focus.”
H&M is also optimizing its store portfolio by closing select locations. The company entered the quarter with nearly 120 fewer stores compared to the same time last year, resulting in 40 net store closures during the period.
