TLDR
- H&M stock fell as much as 6.6% on Thursday after soft March sales guidance
- Q1 operating profit came in at SEK 1.51 billion, beating forecasts of SEK 1.39 billion
- March sales growth guided at 1% in constant currency, below consensus of ~1.8%
- Gross margin expanded to 50.7%, ahead of the ~50.1% expected
- CEO warned a prolonged Middle East conflict could create inflationary pressure on consumers
H&M (HMb.ST) stock dropped as much as 6.6% on Thursday, trading around SEK levels last seen before the spring collection launch, as investors reacted to a weaker-than-expected near-term sales outlook.
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
H&M posted a 26% year-on-year rise in first-quarter operating profit to SEK 1.51 billion ($162 million), beating the analyst consensus of SEK 1.39 billion. It marked the company’s third straight quarter of rising profits.
Gross margin came in at 50.7%, ahead of the roughly 50.1% forecast. Net income attributable to shareholders was SEK 724 million, slightly ahead of estimates. Diluted earnings per share of SEK 0.45 were broadly in line with consensus.
Morgan Stanley analyst Grace Smalley said the results were “largely in line with investor expectations,” with the EBIT beat “primarily driven by gross margin.”
Q1 sales measured in constant currencies fell 1%, roughly in line with consensus expectations for a 0.6% decline. Inventory levels were down 5% year-on-year in constant currency.
March Outlook Misses the Mark
Despite the profit beat, the stock sold off on guidance. H&M said March sales are expected to grow just 1% in constant currency. Analysts had been expecting around 1.8% growth for the second quarter.
Alphavalue analyst Jie Zhang called the figure “somewhat disappointing,” noting it came despite management flagging strong reception for the spring collection.
CEO Daniel Erver pointed to the spring range as a positive. “Towards the end of the quarter our well-received spring collections contributed to a positive sales trend, which also continued into March,” he said.
Inderes analyst Lucas Mattsson struck a cautious tone. “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 said.
Middle East War Adds Uncertainty
The Iran conflict is now a talking point in H&M earnings calls. Erver said the war’s direct impact on H&M has been limited so far. The company has low exposure to the Middle East, where its stores operate through franchise partners, and relies mostly on sea and land freight rather than air.
But he flagged the risk of knock-on effects. “A continued conflict, such as with continued high energy prices, will create inflationary pressure on a consumer who already has tough inflationary pressure,” Erver said.
British retailer Next said earlier Thursday that the war would likely dampen demand while pushing up costs and selling prices.
H&M said it is “closely monitoring developments and the implications for global trade,” and that its flexible supply chain gives it room to adjust logistics if needed.
Morgan Stanley’s Smalley said she was waiting for more detail from the conference call, with “potential indirect implications from the Middle East conflict likely a focus of Q&A.”
H&M has a similar comparison base expected in April and May, keeping the near-term sales picture flat.
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