H&M Group has demonstrated remarkable resilience and adaptability through its latest financial performance, showcasing a robust third-quarter report for the period of June to August 2025. This financial statement reflects not only impressive earnings growth but also effective strategic maneuvers in a challenging retail environment.
Strong Operating Profit Growth
The third quarter saw H&M Group’s operating profit soar by an impressive 40%, reaching SEK 4,914 million (£388.77 million). This marks a significant improvement from SEK 3,507 million (£277.42 million) recorded in the same quarter the prior year. Such a surge in profit highlights the effectiveness of H&M’s operational strategies during a competitive retail landscape.
Enhanced Operating Margin
In its nine-month interim report published on September 25, the group revealed an increase in operating margin from 5.9% the previous year to 8.6%. This improvement is a positive indicator of the company’s ability to manage costs effectively while still focusing on growth.
Sales Dynamics and Currency Impact
While net sales experienced a modest increase of 2% in local currencies during Q3, the stronger Swedish krona had a substantial impact on recorded sales figures. H&M Group reported SEK 57,017 million (£4.51 billion) in sales, a decline compared to SEK 59,011 million (£4.51 billion) from the previous year. Nonetheless, the brand remains confident in its sales trajectory moving forward.
Growth in Gross Profit and Margin
H&M’s gross profit for Q3 was reported at SEK 30,143 million (£2.38 billion), resulting in a gross margin of 52.9%, up from 51.1% last year. The firm attributes this margin enhancement to refined supply chain operations and other favorable external cost factors that have successfully countered adverse currency effects.
Cost Management Strategies
Effective cost management has been central to H&M’s strategy, leading the company to reduce selling and administrative expenses by 5% in SEK terms, bringing them down to SEK 25,167 million (£1.99 billion). This diligent focus on cost control has proven crucial in bolstering overall profitability.
Store Presence and Online Growth
As of August 31, 2025, H&M operates 4,118 stores worldwide, marking a net decrease of 180 stores (-4%) compared to the previous year. Throughout the first nine months, the company opened 36 new stores while closing 171. Notably, over 30% of H&M’s sales now occur online, indicating a significant shift toward digital commerce. To enhance customer experiences, H&M is implementing upgraded store layouts and technological investments that align physical and online shopping experiences.
Global Expansion Plans
In a notable development, H&M made its debut in Brazil by opening its first store and establishing an online presence at the end of August 2025, with further store expansions planned across Latin America. Future openings are set for various countries, including El Salvador, Venezuela, Paraguay, and Malta, as well as launching the first COS store in India.
Sales Expectations and Strategic Focus
Looking ahead, H&M anticipates that September 2025 sales will align with last year’s levels in local currency, although they acknowledge this needs to be measured against strong comparatives from 2024. To navigate the challenges ahead, H&M will utilize supply chain flexibility, a strategic pricing approach, and continued focus on cost efficiency.
Analyst Insights
Robyn Duffy, a senior analyst in consumer markets at RSM UK, recognizes that H&M’s latest results underscore the progress of the company’s turnaround strategy. Despite relatively slow sales growth in local currencies, the significant 40% rise in operating profits can be attributed to effective stock management, an improved gross margin, and stringent cost controls. Duffy points out that the sharper product mix and expedited stock turnover helped reduce inventory by 9% year-on-year, effectively lowering markdowns and boosting margins.
In conclusion, H&M Group is clearly navigating its turnaround journey with determination and vigor. As they continue to invest in product innovation, customer experiences, store enhancements, and digital capabilities, their path forward will rely on maintaining profitability while solidifying their global presence in the fashion industry.
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