Swedish fashion retailer, H&M Group reported a 16 per cent decline in operating profit, reaching approximately $621.1 million at constant currency in Q2, FY25 ending May 31.

H&M attributed this decline to a lower gross margin and negative currency translation effects. The group specified, margins were adversely impacted by external factors such as a more expensive US dollar and elevated freight costs, leading to higher purchasing costs in the quarter.

The continued internal investments in enhancing its consumer offering also played a role. Despite these challenges, the retailer anticipates that the external factors negatively affecting its purchasing in the first half will turn favorable in the latter part of the year.

The group’s sales rose by 1 per cent Y-o-Y in local currencies during the quarter. On a like-for-like basis, sales increased by 3 per cent, a notable achievement given that the retailer has reduced its store count by 4 per cent since May of last year. On a reported basis, Q2 net sales declined by 4.9 per cent Y-o-Y to approximately $5.96 billion at current exchange, due to a stronger Swedish krona.

Daniel Erver, Chief Executive Officer, H&M states, despite these subdued financial results, the company is beginning to see signs of progress, driven by its reduced store footprint and ongoing turnaround plan focused on improving product offerings and the shopping experience.

There have been positive developments in key areas like online sales, H&M womenswear, and H&M Move, along with a sustained focus on cost control, which are expected to contribute to profitable sales growth, he adds.

In H1, FY25, the brand’s sales in local currencies rose by 1 per cent. In reported terms, net revenues for the six-month period declined by 1 per cent to approximately $11.77 billion. Operating profit declined by 22 per cent decline, reaching approximately $748.3 million.