H&M Bets On Speed, Flexibility And Proximity

H&M is accelerating a broad operational reset as it seeks to move faster on fashion cycles, improve efficiency and defend market share in an increasingly unforgiving retail landscape, Chief Executive Daniel Erver said on Thursday.

The Swedish retailer is buying more merchandise with shorter lead times and from factories closer to its core markets, a shift designed to help it respond more quickly to fast-changing trends and erratic weather patterns that can make demand harder to predict.

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“We are able to get product from having a first rough idea to the customer in six weeks, and when we talk about shortening the lead times, it is about increasing the share that we buy in that way,” Erver said in an interview with Reuters. The company is trying to make that model central to its operating playbook rather than an exception.

Western Europe Remains The Pressure Point

The strategy comes as sales growth remains subdued. H&M reported a 1 per cent rise in third-quarter sales in local currency terms, but revenue in Western Europe, its largest market, fell 1 per cent. Erver said consumers in the region have been “under a lot of pressure for a long time,” reflecting the strain on household spending across the continent.

He also pointed to logistics changes, including the closure of H&M’s Belgian warehouse, as a factor weighing on revenue.

“We are not yet where we want to be, but step by step, we are firmly building a faster and more flexible and customer-focussed H&M,” he said.

Energy Costs And Geopolitics Add To The Challenge

H&M is also contending with higher transport costs and supply-chain disruptions linked to the war between the U.S. and Israel and Iran, which has affected shipping and air freight. At the same time, rising fuel prices in Bangladesh — one of H&M’s key sourcing hubs — are adding pressure to production costs.

Erver said the company is working with suppliers in Bangladesh and other markets to accelerate a shift toward renewable energy. That effort, he said, is both a climate imperative and a resilience strategy.

“It’s a good way to accelerate the transformation that we need to lower the CO2 emissions, but also build resilience to geopolitical challenges,” he said. H&M expects to fully phase out coal-fired boilers from its supply chain this year, a meaningful step in its decarbonization push.

One-Off Tariff Refund Lifts Profit

Despite sluggish sales momentum, H&M delivered a sharper-than-expected profit increase in the fiscal third quarter, helped by a one-time refund of U.S. tariff payments. Operating profit rose to 6.04 billion Swedish crowns, or about $608.63 million, from 4.91 billion crowns a year earlier, beating the 5.14 billion crowns forecast in an LSEG poll.

The company cautioned, however, that it does not expect further tariff refunds. That warning, combined with the weak sales trend, disappointed investors. H&M shares fell as much as 3 per cent at the open and were still trading about 2 per cent lower later in the session.

Looking ahead, H&M said September sales would rise 1 per cent in local currencies, matching the pace of the June-to-August quarter but trailing the stronger momentum reported by Inditex, the owner of Zara, which posted 9 per cent growth earlier this month.

Store Closures, Online Growth And A More Selective Footprint

The retailer is continuing to streamline its physical footprint while investing in the parts of the business that can improve speed and availability. H&M has reduced its store count and refurbished existing locations, with around one-fifth of its 4,000 stores upgraded so far.

It is also spending on logistics as online sales have climbed to more than 30 per cent of total revenue. New warehouses in Europe are scheduled to come online this year and next, part of an effort to improve product availability and strengthen fulfillment capacity.

Bracing For Fiercer Competition In E-Commerce

Erver said he welcomed the European Union’s decision to impose customs fees on low-value ecommerce packages, a policy he has argued is necessary to create fairer competition with platforms such as Shein and Temu. He downplayed the direct impact on H&M’s own sales, but the move underscores how aggressively regulators are responding to the rise of ultra-low-cost online retail.

The company’s competitive backdrop remains intense. Shein and Inditex continue to set the pace on speed and pricing, leaving H&M to prove that its turnaround can translate into sustained growth, not just improved margins.

H&M said third-quarter sales totaled 57.189 billion Swedish crowns, compared with 57.017 billion a year earlier.

Meanwhile, the billionaire heirs of founder Erling Persson have quietly increased their stake in the company, fueling speculation that a future privatization bid could eventually emerge. For now, though, the immediate test is more basic: whether H&M can turn operational discipline into durable sales momentum.