H&M Stock Falls After Q2 Profit Miss on Inventory Squeeze

TLDR

• H&M’s Q2 operating profit came in at SEK 5.91 billion, missing the SEK 6.38 billion forecast
• Net sales of SEK 54.83 billion also missed estimates of SEK 55.25 billion
• Tighter inventory management hurt the company’s ability to meet customer demand
• Stripping out SEK 679 million in restructuring costs, adjusted operating profit rose 11% to SEK 6.59 billion
• H&M expects June sales in local currencies to be flat year-on-year

H&M’s stock dropped around 2.5% on Thursday after the Swedish retailer posted Q2 results that fell short of what analysts had expected.

Operating profit for the March-May quarter came in at SEK 5.91 billion. That compares to a forecast of SEK 6.38 billion. Net sales landed at SEK 54.83 billion, also below the SEK 55.25 billion estimate.

The stock was trading at 164.40 crowns, down 4.3 crowns on the day.

Sales in local currencies were roughly flat year-on-year. H&M also had around 3% fewer stores at quarter-end compared to the same period a year ago.

The Numbers Behind the Headline

The headline miss was largely driven by one-off costs. H&M booked SEK 679 million in restructuring charges tied to changes in its sales markets and central sales organisation.

Strip those out, and adjusted operating profit rose 11% to SEK 6.59 billion, a margin of 12% versus 10.4% a year ago. That puts the underlying result around 3-4% above consensus, according to Morgan Stanley.

Gross margin improved to 56.6% from 55.4% a year earlier, beating the 56.5% forecast.

Net income held steady at SEK 3.96 billion. Earnings per share edged up to SEK 2.49 from SEK 2.48. Cash flow from operating activities jumped 24% to SEK 10.59 billion.

Inventory levels fell 10% year-on-year to SEK 34.94 billion. Currency-adjusted, the drop was 2%.

For the first half of 2026, net sales were SEK 104.44 billion, down from SEK 112.05 billion a year earlier. Excluding one-time costs, first-half operating profit rose 14% to SEK 8.10 billion.

What Analysts Are Saying

Morgan Stanley, which rates H&M “underweight” with a price target of 120 crowns, called the result “broadly in line with investor expectations.”

But the bank flagged some caution on the second half. It pointed to slowing constant-currency revenue growth and fading tailwinds from cost cuts, as savings from gross margin and overhead initiatives start to taper off.

The bank also noted that tech investment is set to rise from H2 onward, and raw material and freight costs remain a headwind.

H&M said it expects third-quarter markdowns to be at a similar level to a year ago. June sales in local currencies are expected to come in flat year-on-year.

During the quarter, H&M opened its first store in Rio de Janeiro and reopened its flagship on Hamngatan in Stockholm. The company plans to open its first store in Paraguay in H2 2026 and its first in Argentina in 2027.

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