Improved purchasing and cost control are lifting H&M’s margins, but weak European demand is pushing the retailer toward six-week development cycles, shorter sourcing lead times and more flexible suppliers.
H&M Group’s third-quarter operating profit rose 23% to SEK6.04 billion ($609 million) from SEK4.91 billion a year earlier, comfortably above the SEK5.14 billion analyst consensus. Net sales, however, increased only 1% in local currencies, exposing the retailer’s continuing challenge of converting stronger profitability into sales growth.
For the June–August quarter, sales reached SEK57.19 billion, while gross margin improved to 54.0% from 52.9%. A one-off benefit related to US tariffs and imports added about 1.6 percentage points to the margin, meaning underlying improvement was less dramatic than the headline profit increase suggests.
Six weeks from idea to customer
For apparel suppliers, the more important development is H&M’s sourcing strategy. CEO Daniel Ervér told Reuters that the company can now move some products from an initial concept to the customer in around six weeks and intends to increase the proportion purchased through these faster cycles. H&M is also sourcing more from factories located closer to its major consumer markets.
The shift reflects faster fashion cycles, unpredictable weather and intensified competition from Inditex and Shein. Western European sales fell 1%, even as group sales increased, while September sales are expected to grow only 1% in local currencies.
Flexibility becomes a supplier requirement
H&M is simultaneously investing in digital infrastructure spanning product development, purchasing, allocation, marketing and sales, seeking greater precision in matching inventory with demand. Inventory rose to SEK39.36 billion, partly because supply-chain disruptions increased goods in transit.
Energy resilience is also entering sourcing decisions. Ervér said H&M is working with suppliers, including those in Bangladesh, to expand renewable energy and expects to phase out coal-fired boilers from its supply chain in 2026.
For manufacturers, the signal is increasingly clear: competitiveness with major fashion retailers will depend not only on cost, but on shorter lead times, flexible order quantities, rapid product development, inventory responsiveness and lower-carbon energy.
