H&M Shares Fall as Weak Sales Outlook Overshadows Profit Beat

Shares of Hennes & Mauritz (H&M) fell on Tuesday after the Swedish fashion retailer's disappointing sales growth overshadowed a third-quarter profit beat, signaling to investors that a significant top-line turnaround remains distant.

According to its nine-month fiscal 2026 report, H&M stock dropped 2.4% to 162.3 Swedish crowns (SEK) in morning trade.

Profit Beat Masks Sales Weakness

For the June-to-August quarter, H&M reported financial results that exceeded analyst expectations on profitability but fell short on revenue momentum.

• Operating Profit: Came in at 6.04 billion SEK, significantly above the analyst consensus of 5.14 billion SEK.
• Gross Margin: Widened to 54.0% from 52.9% a year earlier, also topping estimates of 53.4%.

However, the market focused on the company's sluggish sales performance. Sales in local currencies rose just 1% during the quarter. The company's forward guidance provided little reassurance, with sales in September also projected to increase by only 1%, underscoring persistent challenges in reigniting growth.

Cautious Outlook and Rising Costs

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Adding to investor concerns, H&M's management flagged several headwinds for the second half of 2026. The company anticipates higher costs associated with investments in its digital infrastructure, including the implementation of new ERP systems.

Furthermore, H&M plans to slow the pace of its inventory reduction efforts to ensure product availability. While aimed at preventing stock-outs, this move could weigh on margins or cash flow. This cautious tone from management tempered any optimism from the stronger-than-expected profit figures.

Competitive and Market Pressures

The muted sales figures highlight H&M's ongoing struggle against fast-fashion rivals like Inditex's Zara, which analysts note has demonstrated stronger sales momentum. Heading into the report, the consensus analyst rating on H&M stock already leaned toward a Sell.

Even continued share purchases by the founding Persson family, which has raised its stake to over 68% and fueled speculation of the company going private, were not enough to counter the market's disappointment with the growth outlook under CEO Daniel Erver. The stock is now trading closer to its 52-week low of 156.4 SEK than its high of 194.3 SEK.