H&M profits drop as external pressures and markdowns slow growth

H&M has reported a dip in profits for the first quarter of its fiscal year, citing “negative external factors,” increased markdowns, and ongoing investments.

The Swedish fashion giant posted operating profit of SEK 1.2bn (£95m) for the period from December 1, 2024 to February 28, 2025, a decrease of 42% compared to SEK 2.1bn (£160m) in the same period last year.

Sales increased by 2% in local currencies to SEK 55.3 billion (£4.3bn), falling slightly short of analyst expectations.

H&M said the decline in profits was primarily driven by external pressures, including challenging macroeconomic conditions, which were compounded by increased markdowns during the quarter.

The retailer also noted that it continued to invest heavily in enhancing its customer offering, which impacted gross margins.

“Our operating profit was affected by the temporary challenges related to gross margin development, as well as the ongoing investments in our customer proposition,” said CEO Daniel Ervér.

“Despite these hurdles, we remain focused on strengthening our product offering and improving our in-store and online shopping experience.”

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Despite the weaker-than-expected results, Ervér remained optimistic about the long-term prospects of the business, adding: “We continue to invest in our core business, focusing on driving growth through a more integrated and efficient customer experience across both physical and digital channels. We’re confident that the measures we’re taking will support sustainable and profitable growth in the coming months.”

H&M also provided an update on its store network, revealing that it has opened a number of new stores during the quarter, as well as expanding its digital presence through new marketplace initiatives. The retailer is continuing to focus on optimising its store portfolio, with plans to open around 80 new stores in 2025, while closing 190 stores, mainly in established markets.

Looking ahead the retailer remains focused on its strategic priorities: enhancing its customer experience, accelerating product development, and improving operational efficiency.

“While we face challenges in the short term, we are laying the foundation for long-term growth,” Ervér said.

“We will continue to invest in both physical and digital spaces to ensure we are meeting customer expectations and positioning H&M for continued success in the future.”

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