H&M sales dip underscores ongoing positioning challenge amid margin gains

A first-quarter sales dip at H&M has sharpened industry scrutiny around the group’s market positioning, even as profitability continues to improve on the back of cost discipline.

The retailer reported a 1 percent decline in sales in local currencies for the three months to February, while operating profit rose 26 percent to 1.51 billion Swedish kronor, marking a third consecutive quarter of earnings growth. Analysts, however, flagged the modest 1 percent sales outlook for March as underwhelming, pointing to continued demand fragility.

Robyn Duffy, Consumer Markets Senior Analyst at RSM UK, in an email to FashionUnited said: “Today’s news of a sales decline at H&M in Q1 highlights a continued challenge for the business to establish a clear market position.” She added that attempts to compete simultaneously with Zara at the more fashion-forward end and Primark and Shein at the value end have “diluted the brand’s proposition”.

The latest results reflect a broader pattern. In its most recent full year, H&M reported sales of 228.3 billion kronor, down 3 percent, despite a 5 percent rise in net profit, underscoring the growing disconnect between margin recovery and top-line growth.

Duffy noted that “margin performance continues to benefit from full-price sell-through… and disciplined cost control”, echoing company commentary that tighter inventory management and operational efficiencies have supported profitability.

However, macroeconomic risks remain in focus. As Duffy cautioned: “Everything will depend on how long the Iran conflict lasts… consumers tend to have a delayed reaction to energy shocks.”

With pressure on consumer demand and pricing power, the coming months will test whether H&M can translate operational gains into sustained sales momentum.