中文H&M’sProfitability Turnaround: Margins Expand Despite Flat Sales
H&M, the Swedish fashion giant, is proving that profitability can improve even when sales remain flat. In the second quarter of fiscal 2026, the company reported that sales remained broadly unchanged in local currencies, while improved margins and lower costs helped to increase profitability. This performance offers valuable lessons for retailers navigating challenging market conditions.
Second Quarter Results: Profitability Over Volume
In the second quarter of the 2026 financial year, which ended on May 31, H&M’s net sales totaled 54.82 billion Swedish kronor (4.95 billion euros). On local currencies, sales remained consistent with those of the same period last year, despite a roughly 3% reduction in the number of stores. However, the stronger Swedish krona reduced reported net sales by almost 3 percentage points when foreign-currency revenues were converted into SEK.
The real story, however, was in the margins. H&M’s gross margin widened by 120 basis points compared with the same quarter of the previous year, rising from 55.4% to 56.6%. This improvement reflects enhanced sourcing efficiency and stronger supplier partnerships—a strategic focus that allowed the company to expand margins even without top-line growth.
SG&A expenses declined by 1% year-on-year in the second quarter, demonstrating continued cost discipline. Meanwhile, operating profit before restructuring costs increased by 11% to 6.59 billion Swedish kronor (595.5 million euros), and the operating margin improved by 160 basis points to 12.0%, up from 10.4% in the second quarter of the 2025 financial year.
Inventory Productivity: A Key Success Factor
One of the most impressive aspects of H&M’s second-quarter performance was its inventory management. The company reduced its inventory by 10% year-on-year to 34.94 billion Swedish kronor (3.2 billion euros) by the end of the quarter. This reflects a shift towards tighter inventory management and lower working capital requirements, all the while ensuring product availability is maintained.
For footwear and apparel retailers, this is a critical lesson: reducing inventory while maintaining sales is a powerful way to improve cash flow and reduce markdowns. H&M’s 10% inventory reduction, combined with flat sales, means the company is turning inventory faster and with less capital tied up in stock.
First Half Results: Sustained Improvement
In the first half of the current fiscal year, H&M reported net sales of 104.44 billion Swedish kronor (9.44 billion euros). Sales in local currencies declined by 1% compared to the same period a year earlier.
However, the profitability story continued to impress. Gross margin improved from 52.3% in the first half of 2025 to 53.8%, and operating profit before one-off costs increased by 14% year-on-year to 8.10 billion Swedish kronor (731.9 million euros).
Leadership Commentary: Laying Foundations for Growth
Daniel Ervér, CEO of H&M, provided a balanced assessment of the quarter: “Sales in the quarter were somewhat lower than planned, while profitability and the stock-in-trade situation developed well. The profitability improvement and increased inventory productivity are in line with our long-term work to lay the foundations for sustainable and profitable growth.”
This commentary highlights an important strategic shift: H&M is prioritizing profitable growth over volume growth. In an era of cautious consumer spending and promotional intensity, expanding margins and improving inventory productivity may be more valuable than simply growing sales at the expense of profitability.
Current Quarter and Outlook
Looking ahead, H&M said that sales in June were expected to be broadly unchanged from a year earlier in local currencies, while third-quarter markdown costs were expected to remain stable. The company added that it is monitoring developments in the Middle East but emphasized that its flexible supply chain enables it to respond to changing conditions.
The mention of the Middle East is notable, as geopolitical tensions in that region have affected several retailers with significant exposure there. H&M’s flexible supply chain appears to be a competitive advantage in navigating such uncertainties.
Lessons for the Footwear and Apparel Industry
H&M’s second-quarter results offer several important lessons for footwear and apparel executives:
- Margin expansion is possible even without sales growth: By focusing on sourcing efficiency, supplier partnerships, and cost discipline, retailers can expand margins even in a challenging sales environment.
- Inventory productivity matters: Reducing inventory while maintaining sales improves cash flow, reduces working capital requirements, and minimizes the need for margin-eroding markdowns.
- Store optimization: H&M reduced its store count by roughly 3% while maintaining sales. This suggests that store productivity is improving, and that the company is rationalizing its physical footprint to focus on higher-performing locations.
- Flexible supply chain as a competitive advantage: In an era of geopolitical uncertainty and shifting consumer demand, a flexible supply chain enables retailers to respond quickly to changing conditions.
- Profitability over volume: H&M’s results demonstrate that prioritizing profitability and inventory productivity can create a stronger foundation for long-term growth than simply chasing sales volume.
Conclusion
H&M’s second-quarter results for 2026 demonstrate that profitability turnarounds are possible even in challenging market conditions. By focusing on margin expansion, cost discipline, and inventory productivity, the company delivered an 11% increase in operating profit despite flat sales.
For footwear and apparel retailers facing similar challenges—cautious consumer spending, promotional intensity, and geopolitical uncertainty—H&M’s approach offers a valuable blueprint. The key is to prioritize profitable growth over volume growth, and to build the operational capabilities (sourcing efficiency, inventory management, supply chain flexibility) that enable margin expansion even without top-line growth.
As CEO Daniel Ervér noted, these improvements are “in line with our long-term work to lay the foundations for sustainable and profitable growth.” For an industry often fixated on sales growth at any cost, this is a refreshing and potentially more sustainable approach.
Source: World Footwear
