This article first appeared on GuruFocus .
Release Date: September 24, 2026
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
Positive Points
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H & M Hennes & Mauritz AB ( HMRZF ) delivered a strong operating profit with an operating margin of 10.6% in Q3 2026, including a positive one-off effect of 1.6 percentage points from tariff adjustments.
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Net sales increased by 1% in local currencies, with growth in all regions except Western Europe, and portfolio brands returned to growth with a 3% increase.
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The rolling 12-month operating margin improved to 9% from 7.2% last year, driven by better sourcing, cost control, and more efficient ways of working.
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The company is increasing flexibility through a higher share of in-season buying and shorter lead times, which should improve full-price sales and customer responsiveness.
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Store optimization efforts are yielding positive results, with approximately one-fifth of the portfolio upgraded and showing incremental sales improvements and positive customer reception.
Negative Points
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Sales growth was only 1% in local currencies, and H & M Hennes & Mauritz AB ( HMRZF ) is not satisfied with this level, as no single customer group performed strongly enough.
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Western Europe continued to face challenging market conditions with cautious consumers and high promotional activity, particularly in Germany and the UK.
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External factors, such as higher transportation costs, are expected to negatively impact gross margin in Q4 and potentially into 2027, with material prices also creating headwinds.
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Inventory levels increased by SEK 1.4 billion year-over-year due to supply chain disruptions and strategic buying, which may require higher markdowns in Q4.
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The ERP rollout and organizational changes are ongoing and will continue to affect SG&A costs into 2027 and 2028, with a startup lag and upward pressure on expenses.
Q & A Highlights
Q: On the gross margin, you mentioned maintaining the normalized 54% to 55% range. Does that mean the headwinds discussed for next year are to be largely mitigated with self-help measures like supply chain consolidation? And can you give a sense of the magnitude of change in in-season buying and how you're changing proximity sourcing? A: CFO Adam Carlsson stated the ambition is to have a normalized gross margin over time, and the target interval is what they are steering towards. He noted that internal work should mitigate external factors, but it's not a given under all circumstances. CEO Daniel Erwiger added that they are significantly increasing the share of fashion assortment bought with shorter lead times, which can be through proximity sourcing or different supplier bases and transport modes. For the fourth quarter, a significantly higher part of trend-sensitive assortment was sourced later in-season compared to last year.
Q: Can you elaborate on the magnitude of the negative external factors for Q4 and coming quarters? Are the negative effects from Q3 worsening in Q4 and into H1 2027, or is it about the same level? A: Head of IR Josef Albe explained that in Q3, external factors were a net negative, somewhat worse than expected, driven by increased freight costs. For Q4, the guidance is for a similar development, with markdowns increasing somewhat year-over-year and added freight costs being the key driver. He also noted that material prices are expected to create a headwind towards the end of the year, with a more significant effect coming into 2027.
Q: Can you comment on where you are with the new, flatter organization and what your initial reflections have been? A: CEO Daniel Erwiger said the new organization is now live across almost all markets, with one or two exceptions. He sees it as positive that there are now "eyes and ears" close to customers in all 82 markets, combining global strengths with local relevance. He noted early positive indications but also acknowledged a startup lag as new teams get to know their markets. He confirmed the implementation is more or less fully complete.
Q: You mentioned buying cautiously for the US last year. Is there a risk that you're now buying more optimistically into a challenging US consumer environment? A: CEO Daniel Erwiger explained that last year's cautious plan for the US led to inventory gaps in certain price groups and garment types. The current increase in stock levels is largely to cover those gaps and better meet customer demand. He believes they are now better set up for the US and are seeing promising signs, while remaining on their toes to monitor the consumer and adapt quickly with a more responsive supply chain.
Q: Can you provide an update on the store optimization program? How are the refurbed stores performing, and are you satisfied? A: CEO Daniel Erwiger stated they have touched approximately one-fifth of their store portfolio with various actions, including technology upgrades (RFID, self-checkout), layout improvements, and full rebuilds. He reported a positive reception from customers who appreciate the improved clarity, inspiration, and convenience. He also noted a positive incremental sales impact for those specific stores, with further potential to accelerate, and the work will continue with high activity throughout 2027.
Q: Can you give a sense of the year-on-year difference in exchange rate impacts on the gross margin, given last year had a positive effect from intra-group receivables? A: Head of IR Josef Albe confirmed that last year's positive impact from the revaluation of intra-company receivables and liabilities was an outlier. This year, there was no such impact. He reiterated that adjusting for both this FX effect and the positive 160 basis point impact from tariff adjustments, the underlying gross margin still showed a slight improvement year-over-year.
Q: What is the outlook for tariff refunds in the coming quarters? A: Head of IR Josef Albe stated that they do not expect to see any further adjustments connected to tariffs in coming quarters. He explained that a structured process was entered into in June and was concluded in the third quarter, so no further refunds are expected.
Q: Can you comment on the disruptions in your supply chain and the consolidation of your European logistics network? When do you expect that to be finalized? A: CEO Daniel Erwiger described two types of disruptions. The first relates to global supply chains, particularly the situation in the Middle East, causing delays and compromising air freight. This led to goods being delayed and some Q4 deliveries being preponed, explaining the year-over-year stock increase. The second is the consolidation of European warehouses, including the closure of a Belgian warehouse affecting Southern Europe. He said these effects are now wearing out and should be resolved during the rest of Q4.
Q: Can you elaborate on the full-year sales effect from store optimization? What was the outcome in Q3? A: CEO Daniel Erwiger confirmed that the net effect from store optimization was slightly positive in the third quarter. He expects a similar level of positive effect in the fourth quarter, and for the full year, the net effect is estimated to be slightly positive.
Q: You warned of slightly higher markdowns in Q4, highlighting Cyber Monday. Is that the only reason, and what is the expected sales impact from the calendar shift? A: CEO Daniel Erwiger confirmed the main effect is the shift of Cyber Monday. He also noted that global supply chain disruptions have led to increased stock levels that need to be managed. CFO Adam Carlsson added that the calendar shift means one more selling day in November, which should be somewhat positive for fiscal year 2026. However, Head of IR Josef Albe cautioned that the positive impact on the quarterly sales outlook is not significant.
Q: What are you seeing post de minimis removal in Europe, and is it causing a harder push of Chinese players into the UK? A: CEO Daniel Erwiger sees the implementation of fees in Europe and the US as a positive step towards a more equal playing field, which is good for customers. He noted that the industry remains very fragmented, with no player having more than a low single-digit market share, so the impact should be seen in that light. He believes creating competition on equal terms is a positive step for customers across both regions.
Q: Have you seen any small positive effects on market share gains over the summer from the increased taxes on e-commerce players? For the complete transcript of the earnings call, please refer to the full earnings call transcript .
