Hennes & Mauritz (H&M), one of the world’s largest fashion retailers, will release its Q2 2025 earnings report on Thursday, June 26, and the markets are watching closely. Amid ongoing cost pressures and weak consumer demand, analysts anticipate a dip in profitability and sluggish sales performance. Yet some investors remain hopeful that the quarter could signal the early signs of a turnaround.
Expectations Point to a Tough Quarter
Analyst consensus suggests that H&M will report an operating profit of around SEK 5.6 billion, down from SEK 7.1 billion in Q2 last year. Total revenue is forecasted to decline year-over-year, with estimates hovering around SEK 56.9 billion compared to SEK 59.6 billion previously.
This potential decline reflects broader headwinds in the retail sector. Unseasonably cool weather, currency fluctuations, and cautious spending habits among consumers have all contributed to a challenging operating environment.
Margin Pressures Remain a Key Concern
Despite efforts to improve efficiency and streamline operations, H&M continues to face pressure on its gross margins. Analysts from Inderes note that while the company is showing progress on strategic fronts such as logistics and assortment, the visibility of a full-scale turnaround remains limited.
The fashion retail industry is particularly sensitive to price competition, and H&M's competitors — including Zara’s parent company Inditex — have reported similar softness in recent sales trends.
External Risks and the Valuation Debate
In addition to operational hurdles, external risks such as rising tariffs and currency volatility have created added uncertainty. For a company with significant global exposure, the impact of a stronger dollar and higher import costs has weighed on earnings potential.
Valuation debates also persist. While some believe H&M is undervalued, given its long-term brand strength and improving digital capabilities, others argue that margin risk still outweighs potential upside in the short term.
Investor Sentiment: Mixed, but Watchful
Despite the gloom in near-term expectations, sentiment is not uniformly negative. Handelsbanken recently reinstated its coverage of H&M with a “buy” rating, citing potential stabilization in profitability and strategic flexibility. The bank also pointed to the Persson family’s continued share accumulation, which some interpret as positioning for a long-term buyout scenario.
This speculation has contributed to limited downside movement in H&M's share price, even amid lackluster quarterly performance forecasts.
What to Watch in the Report
Investors will be focusing on several key areas in the Q2 report:
- Gross Margin: Any signs of recovery or stabilization will be closely watched.
- Sales in Key Regions: Performance in Europe and North America may provide early signals of consumer behavior shifts.
- Inventory Management: How well H&M is controlling stock levels will influence cash flow and profitability.
- Outlook for Q3: Forward guidance could be more influential than Q2 results, especially amid uncertainty over global consumer trends.
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Trading Implications
For CFD traders and investors, the report could trigger short-term volatility. Price reactions are likely to depend on how the actual figures compare to the already low expectations. A smaller-than-expected drop in earnings could spark relief buying, while a deeper miss might reinforce bearish sentiment.
As always, trading around earnings involves significant risk, particularly with leveraged instruments.
