H&M Shares Decline 7% After Sales Forecast Falls Short

TLDR

• H&M stock dropped as much as 6.6% on Thursday following underwhelming March sales guidance
• Q1 operating profit hit SEK 1.51 billion, outperforming forecasts of SEK 1.39 billion
• March sales growth is guided at 1% in constant currency, falling short of the consensus of ~1.8%
• Gross margin expanded to 50.7%, exceeding the ~50.1% that analysts expected
• CEO warned a prolonged Middle East conflict could add extra inflationary pressure on consumers

(SeaPRwire) –   H&M (HMb.ST) shares fell as much as 6.6% on Thursday, trading at SEK levels last recorded before the spring collection launch, as investors responded to a weaker-than-projected near-term sales outlook.

H&M outperforms 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 reported a 26% year-on-year jump 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 growing profits.

Gross margin registered at 50.7%, ahead of the roughly 50.1% forecast. Net income attributable to shareholders hit SEK 724 million, slightly ahead of analyst estimates. Diluted earnings per share of SEK 0.45 were broadly aligned with consensus projections.

Morgan Stanley analyst Grace Smalley said the results were “largely in line with what investors expected,” with the EBIT beat “primarily driven by stronger gross margin performance.”

Q1 sales measured in constant currencies fell 1%, roughly matching consensus expectations for a 0.6% decline. Inventory levels were 5% lower year-on-year in constant currency terms.

March Forecast Fails to Meet Expectations

Despite beating profit projections, the stock declined sharply following the release of guidance. H&M stated March sales are expected to grow just 1% in constant currency. Analysts had forecast around 1.8% growth for the second quarter.

Alphavalue analyst Jie Zhang called the figure “somewhat disappointing,” noting the weak reading came even after management highlighted strong customer reception for the spring collection.

CEO Daniel Erver pointed to the spring collection 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 the business hasn’t showed any clear upward trends or patterns on that front yet,” he said.

Middle East Conflict Adds New Uncertainty

The Iran conflict is now a key topic of discussion in H&M earnings calls. Erver said the war’s direct impact on H&M has been limited up to this point. 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 freight.

But he flagged the risk of knock-on effects. “A continued conflict, which would keep energy prices high, will add extra inflationary pressure on consumers who are already facing steep inflationary strain,” Erver said.

British retailer Next said earlier Thursday that the war would likely soften consumer demand while pushing up operational costs and retail 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 arrangements if needed.

Morgan Stanley’s Smalley said she was waiting for more detail from the upcoming conference call, with “potential indirect implications from the Middle East conflict likely a core focus of the Q&A session.”

H&M expects a comparable year-over-year comparison base for April and May, leaving the near-term sales outlook flat.