By Dominic Chopping

STOCKHOLM--Hennes & Mauritz reported a quarterly earnings beat as well-received collections and tight cost control boosted profit, but said the current fiscal year has got off to a soft start.

Under Chief Executive Daniel Erver, the Swedish fast-fashion retailer is working to improve sales by getting more desirable collections into stores faster, while also trying to attract customers through a marketing push and upgraded stores.

As part of those plans, the company has been tweaking its manufacturing base to reduce dependence on Asian supply chains, allowing it to respond to changing trends quicker and limit overstocking.

Inventory levels fell 12% in the quarter and with a more efficient and flexible supply chain and more purchasing in season, the inventory position can improve further, it said. The addition of new warehouses in Europe will begin to come online this year and will also help ensure stock availability and help serve both online and bricks-and-mortar stores.

The company said Thursday that sales in its fiscal fourth quarter--which runs from September through November--rose 2% in local currencies, beating a Citi forecast of 1.3%, despite having 4% fewer stores at the end of the quarter compared with the previous year.

The process to close less-profitable stores while revamping others hurt sales last year overall, but the sales effect from this store optimization is expected to be slightly positive this year, it added.

"Through a strengthened customer offering, good cost control and improved inventory productivity, we continue to take important steps toward all our long-term targets in a challenging environment," Erver said in a statement.

However, as the company enters the new year, it said sales between December and January--which mark the first months of its first quarter--are expected to fall 2% in local currencies. The company had strong sales during Black Friday week at the end of November, which led to subdued demand in December, while Chinese New Year falling in February also weighed.

"Recent trading is softer than expected," RBC Capital Markets analyst Richard Chamberlain said in a note to clients.

He had estimated a 0.5% drop in the December to January period, versus the 2% drop flagged by H&M.

At the same time, geopolitical and economic uncertainty continues, and after warning that the impact of tariffs would increase in the fourth quarter, it said Thursday that the impact will increase further in the first quarter of this year.

Fourth-quarter operating profit rose to 6.36 billion kronor ($719.6 million) from 4.62 billion kronor, as sales fell 4.8% to 59.22 billion kronor. A FactSet poll had expected operating profit of 5.83 billion kronor on sales of 59.66 billion kronor.

The company reported a gross margin of 55.9% in the quarter, up from 54.6% a year earlier, but the effect of the stronger Swedish krona on the margin is expected to be slightly more negative in the first quarter than in the final quarter of last year.

Shares are down 1.6% in mid-morning European trade.

Write to Dominic Chopping at dominic.chopping@wsj.com

(END) Dow Jones Newswires

January 29, 2026 05:31 ET (10:31 GMT)

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