New profit drop forces H&M to close more stores

Swedish fast-fashion giant H&M saw its profits drop sharply in the first quarter of its 2025 financial year. The group has announced swift measures, including a “reshuffle” of its store portfolio.

Closed 40 stores, more to come

Despite a 3 % increase in turnover to 55.3 billion Swedish kronor (4.8 billion euros), H&M’s net profit halved compared to a year earlier to 579 million kronor (50 million euros). Operating profit fell by 42 % to 1.2 billion kronor (100 million euros), partly due to a deteriorating gross margin that fell from 51.5 % to 49.1 %.

CEO Daniel Ervér admits the group is dealing with negative ‘external factors’, higher discounts and investments in the customer proposition. The gross margin was also under pressure due to currency effects: the Swedish krona gained in value, resulting in less favourable conversion.

The number of physical stores fell by 125 locations in one year to 4,213. In the first quarter, the group closed a net 40 stores. For the entire calendar year, H&M plans to open eighty new stores, mainly in growth markets such as Brazil and Paraguay, while 190 stores will close, mainly in established markets. Many Monki stores will disappear; a limited number of these will be relaunched as Weekday.

Second quarter should improve

H&M’s focus is increasingly shifting to large flagship stores and online sales: around 30 % of turnover was already generated online. Its renewed digital shopping environment was rolled out in more countries and was well received, according to the group. Physical stores are also being revamped, with continued investment in renovations and technological upgrades.

The group’s outlook remains cautiously positive: for March, H&M expects sales growth of 1 % in local currency. The company emphasises that the negative effects on margins in the second quarter will be significantly smaller. More intensive cooperation with strategic suppliers should ultimately lead to better margins and a stronger customer offering.