H&M Misses Spring Profit Forecast After Inventory Shortfalls and Rising Cotton Costs
H&M misses spring profit forecasts as inventory missteps and higher cotton costs weigh on sales; March–May operating profit falls short of estimates.
H&M reported weaker-than-expected results for the spring quarter, with management attributing the shortfall to uneven inventory availability that prevented the company from fully satisfying customer demand. The group said it delivered operating profit for the March–May period but fell short of analysts’ projections, and warned that sales in June are expected to be flat on a currency-adjusted basis. CEO Daniel Ervér acknowledged the company had not met its sales ambitions even as management pointed to improved profitability and inventory productivity as priorities for the year ahead.
H&M posts weaker-than-expected spring operating profit
H&M recorded an operating profit of 5.91 billion Swedish kronor for the March–May quarter, below the consensus estimate of 6.38 billion kronor and breaking a streak of three consecutive quarters of rising profits. Management framed the result as a mixed outcome: solid in terms of margin performance but disappointing on the top line. The company said the missed revenue target reflected both internal execution issues and external market pressures.
Inventory shortfalls limited ability to meet demand
Executives said shortcomings in warehouse and stock management constrained availability in some product groups, leaving unmet customer demand during a key selling period. Daniel Ervér described instances in which assortment and replenishment timing made it difficult to capitalize fully on market interest. The company plans to focus on higher productivity of inventory and improved logistics to align stock levels more closely with demand patterns going forward.
Profitability held up despite sales weakness
While revenue dynamics disappointed, H&M reported continued improvements in profitability metrics that management described as consistent with long-term objectives for sustainable growth. Gross margin and operational efficiency showed resilience even as input costs rose and consumer confidence softened in core European markets. Analysts and company briefings highlighted the tension between short-term sales performance and structural improvements aimed at boosting long-term returns.
Consumer confidence erosion and rising commodity costs
H&M pointed to a decline in consumer trust across important European markets as a factor weighing on sales, together with a notable increase in raw material prices that has added pressure to margins. Cotton prices in particular climbed markedly in recent months, the company said, contributing to higher procurement costs for key product categories. Management emphasized that these external headwinds intensify the need for tighter inventory control and pricing discipline to protect margins.
Latin America expansion to continue amid challenges
Despite the softer spring result, H&M confirmed its plan to expand in Latin America, aiming to open its first store in Paraguay in the second half of the year and to enter Argentina in 2027. The company described the regional push as part of a broader strategy to diversify its geographic footprint and capture growth opportunities outside Europe. Executives also reiterated commitments to circularity and sustainability initiatives even as they balance expansion with near-term profitability objectives.
Looking ahead, H&M expects currency-adjusted sales for June to be roughly flat compared with the same period last year, underlining a cautious short-term outlook. Management said it will prioritize improving inventory productivity and supply-chain responsiveness to avoid repeat shortfalls and to lay the groundwork for sustainable, profitable growth. Investors and analysts will watch upcoming trading updates and execution milestones to judge whether the group can convert operational improvements into stronger sales momentum.
