A close-up view of the illuminated red H&M logo in front of a display of women’s summer dresses and casual apparel at a retail store.
Cheng Xin | Getty Images News | Getty Images
Swedish clothing giant H&M on Thursday pointed to an uptick in demand to kick-start the summer season, sending shares higher.
The world’s second-largest clothing retailer said sales in June were seen increasing 3% in local currencies following a slow start to the year.
Shares were up 5.4% by 10:15 a.m. London time, slightly paring earlier gains.
The company, whose brands also include Cos, Arket and Weekday, nevertheless noted a sense of caution among consumers in current “uncertain times,” noting that shoppers were “particularly price sensitive.”
It did not provide specific detail on the impact of U.S. trade tariffs, but said that it was “closely monitoring developments” and considering price hikes to offset added costs.
“We are starting to see some competitors increasing prices and this is something we are of course looking into to ensure we remain competitive,” CEO Daniel Erver said during an earnings call.
H&M counts the U.S. as its second-largest single market and is heavily depends on production in Asia, most notably China and Bangladesh.
“The U.S. is an important market for us and will continue to be,” Erver said, noting that the impact of tariffs would become clearer in July, once the 90-day levy pause expires.
“With good flexibility in the supply chain and through the pricing of the customer offering there are opportunities to adapt the business to changed conditions,” the company added in a statement accompanying the results.
It comes as H&M posted weaker-than-expected sales in the fiscal second quarter.
Revenues at the retailer dipped year-on-year to 56.71 billion Swedish krona ($5.99 billion) in the three-month period to May. 31, slightly below the 57.01 billion Swedish krona forecast by LSEG analysts. In local currencies, sales were up 1%.
Operating profit totaled 5.9 billion Swedish krona over the quarter, in line with expectations but down year-on-year.
The company said that the quarter’s results were “negatively affected” by higher purchasing prices from a more expensive U.S. dollar and higher freight costs.
H&M.
“The negative external factors that increased the costs of purchasing for the first half of the year are turning positive for the second half of the year,” Erver said in a statement.
It also flagged 200 store closures scheduled for 2025, primarily in established markets, and 80 new store openings, largely in growth markets.
The fashion retailer previously reported a slow start to the year, but pointed to an annual uptick in sales in March.
H&M has faced several consecutive quarters of soft sales, as it has struggled to close a widening gap with Inditex-owned rival Zara and fend off increased competition from lower-cost retailers, such as Shein and Temu.
U.S. tariffs and weak consumer confidence have nevertheless become a drag for the retail sector more widely, with Inditex earlier this month posting weaker-than-expected quarterly sales and a slower start to the summer amid broad economic uncertainty.
Retail and consumer goods emerged as the most distressed sector in Europe, according to a new report from law firm Weil, Gotshal & Manges LLP, which cited tight credit conditions, cost inflation and weaker consumer demand among pressures on the industry.