Swedish fashion retailer H&M posted a larger-than-expected rise in third-quarter profit on Thursday, supported by well-received autumn collections, a stronger product mix and tighter cost control. The company, however, cautioned that tariffs on imports would weigh more heavily on margins in the current quarter.
In a statement, H&M said its autumn collections had been “well received.” Chief executive Daniel Erver, who took over in January 2024, said the company was “taking further steps in the right direction” as he continued efforts to improve profitability and sharpen the brand’s appeal against fast-fashion rivals such as Shein and Inditex’s Zara.
Operating profit for June to August rose to US $ 531 million, up from US $ 380 million a year earlier, and beating analyst expectations of around US $ 400 million in a poll conducted by LSEG. The result followed two consecutive quarters of falling earnings and was driven by a 2% rise in local-currency sales alongside improved efficiency.
Despite the profit beat, H&M warned that tariff-related costs would be more pronounced in the current quarter, which runs through November.
Analysts at JP Morgan said the performance could prompt higher expectations for the full year, although they noted that H&M’s comments on tariffs were more restrained than anticipated. Both JP Morgan and Alphavalue welcomed a 9% drop in inventory levels, with the retailer reporting stronger full-price sales as shoppers purchased more items in season.
H&M said markdowns in the third quarter were slightly higher than a year earlier and are expected to rise further in the fourth quarter, partly because Black Friday falls one day earlier this year.
Sales fell to US $ 6.2 billion from US $ 6.4 billion, slightly above analyst expectations of US $ 6.15 billion. Local-currency sales in September were expected to remain flat compared with an unusually strong figure in the same month last year.
The company, whose customers are considered more price-sensitive than those of Inditex, has faced sustained pressure as consumers cut spending amid higher living costs. With the prospect of higher US tariffs, H&M has also been working to diversify its supply chain by sourcing closer to its second-largest market after Germany.
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