Key Highlights
- Swedish fashion retailer’s shares tumbled up to 6.6% Thursday following disappointing March revenue projections
- First-quarter operating profit reached SEK 1.51 billion, surpassing analyst estimates of SEK 1.39 billion
- Company projects March revenue growth of just 1% in constant currency terms, significantly below the ~1.8% analyst consensus
- Gross profit margin improved to 50.7%, exceeding expectations of approximately 50.1%
- Chief executive highlighted concerns about Middle East tensions potentially driving consumer price pressures
Shares of Swedish fashion giant H&M (HMb.ST) plummeted as much as 6.6% during Thursday’s trading session, retreating to price levels not witnessed since prior to the company’s spring collection debut, as market participants digested disappointing forward-looking revenue guidance.
H&M beats profit estimates, but the market remains cautious on the sales recovery
🧵 H&M’s Q1 2026 report showed a clear improvement in earnings quality, with operating profit reaching SEK 1.512 billion, up 26% year over year and above market expectations. Gross margin also rose… pic.twitter.com/Gj43nvEMI0
— ScalpingX (@ScalpingX) March 26, 2026
The Stockholm-based retailer reported first-quarter operating profit of SEK 1.51 billion ($162 million), representing a 26% year-over-year increase and exceeding the SEK 1.39 billion analyst consensus estimate. The results represented the company’s third consecutive quarter of expanding profitability.
The company’s gross profit margin reached 50.7%, outpacing the approximately 50.1% figure anticipated by market watchers. Net profit attributable to shareholders totaled SEK 724 million, modestly exceeding projections. Diluted earnings per share came in at SEK 0.45, meeting consensus expectations.
Morgan Stanley equity analyst Grace Smalley characterized the quarterly results as “largely in line with investor expectations,” attributing the EBIT outperformance “primarily driven by gross margin.”
First-quarter revenue measured in constant currency terms declined 1%, closely matching consensus projections for a 0.6% contraction. The company’s inventory position decreased 5% year-over-year when measured in constant currency.
March Revenue Guidance Falls Below Expectations
Despite the better-than-anticipated profit performance, investor selling pressure intensified following the company’s forward outlook. H&M indicated that March revenue is projected to increase by merely 1% in constant currency terms. Market analysts had previously estimated approximately 1.8% growth for the second quarter.
Alphavalue equity analyst Jie Zhang characterized the projection as “somewhat disappointing,” particularly given management’s earlier commentary highlighting positive consumer response to the spring merchandise collection.
Chief Executive Officer Daniel Erver emphasized the spring product line as an encouraging development. “Towards the end of the quarter our well-received spring collections contributed to a positive sales trend, which also continued into March,” he stated.
Inderes analyst Lucas Mattsson adopted a more reserved outlook. “We don’t expect any particularly strong sales growth in 2026, precisely because they haven’t showed any clear trends or patterns on that yet,” he commented.
Middle East Tensions Create Additional Uncertainty
The Iran conflict has emerged as a discussion topic during H&M’s quarterly earnings presentations. Erver indicated that direct operational impacts from the regional conflict have remained minimal to date. The retailer maintains limited exposure to Middle Eastern markets, where locations operate through franchise arrangements, and predominantly utilizes maritime and overland transportation rather than air cargo.
However, he cautioned about potential secondary consequences. “A continued conflict, such as with continued high energy prices, will create inflationary pressure on a consumer who already has tough inflationary pressure,” Erver explained.
UK-based competitor Next commented earlier Thursday that the ongoing conflict would likely suppress consumer demand while simultaneously elevating operational costs and retail pricing.
H&M stated it is “closely monitoring developments and the implications for global trade,” emphasizing that its adaptable supply chain infrastructure provides flexibility to modify logistics arrangements if circumstances require.
Morgan Stanley’s Smalley indicated she was anticipating additional clarity from the earnings conference call, with “potential indirect implications from the Middle East conflict likely a focus of Q&A.”
H&M faces similar year-over-year comparison benchmarks anticipated for April and May, suggesting the near-term revenue trajectory will remain relatively flat.
