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From a conference room atop H&M\u2019s headquarters in the heart of Stockholm \u2013 with its brown-toned wood and clean lines giving the space a distinctly Scandinavian feel \u2013 chief executive Officer Daniel Erv\u00e9r speaks of reviving the one-time Swedish highflyer. What he\u2019s up against is a credibility problem.<\/p>\n
Eight years ago, after a record quarterly sales drop, Hennes & Mauritz AB\u2019s then CEO Karl-Johan Persson, a scion of its billionaire founding family, had gathered shareholders in the historic Stockholm concert hall Cirkus for its first \u2013 and only \u2013 capital markets day to reassure them that things would get better.<\/p>\n
Read:
How Shein and Temu have gobbled market share from SA retailers
Shein\u2019s robust US growth evaporates after Trump tariff hit<\/p>\n
They didn\u2019t.<\/p>\n
Just weeks after the event \u2013 where Persson had cut a dapper figure, tie-less, in a white shirt and an Arket suit \u2013 the company dumped more bad news: roughly $4 billion in unsold garments\u00a0and a 62% drop in operating profit.<\/p>\n
Now, Erv\u00e9r \u2013 who took over in 2024 \u2013 is seeking once again to convince investors that the group has\u00a0turned a corner. Alongside an ambitious remake, Erv\u00e9r has sought to dig H&M out of one of the biggest inventory pileups in modern retail. While those efforts are bringing richer operating margins and profits, they have yet to lead to sustained sales growth, and Erv\u00e9r\u00a0is asking for patience.<\/p>\n
\u201cWe have begun to lay a stable foundation for future growth,\u201d the 44-year-old Swede, a quintessential insider who\u2019s spent his entire career at the company, said in an interview on April 1. \u201cThat can be seen in increased profitability, better cash-flow earning capacity, lower inventory levels\u2026 Over time that will lead to us seeing stronger growth. I think we are at the beginning of the journey, but it is a long-term journey.\u201d<\/p>\n
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Time is something investors are reluctant to give the company. From its 2015 peak, H&M has lost roughly\u00a0half its market value, erasing tens of billions of dollars in equity. Just two years earlier, it had been\u00a0Stockholm\u2019s most-valuable listed company.<\/p>\n
An H&M store in Shanghai. Chinese ultra-low-cost rivals like Shein and Temu have reset the market. Image: Qilai Shen\/Bloomberg<\/p>\n
H&M\u2019s inability to stack up in the $1.9 trillion global apparel market against Zara-owner Inditex SA on the higher end and an onslaught from cutthroat price-driven competitors like Shein and Primark means investors are unwilling to bite. And there\u2019s little to suggest that trend will be reversed anytime soon \u2013 H&M\u2019s sales on a constant currency basis slid 1% in its\u00a0first quarter.<\/p>\n
\u201cI think the margin improvement that H&M has managed to achieve under Erv\u00e9r is impressive, but I still miss growth at the company,\u201d said Lars Soderfjell, head of Nordic Equities\u00a0at Finland\u2019s Alandsbanken Abp. \u201cThe big question is whether H&M is still relevant to its core customers \u2013 women aged 15 to 30.\u201d<\/p>\n
H&M was slow to grasp the structural changes in the industry, which were transformed dramatically in the last decade by digitalisation. Without the need for a physical store, hundreds of new competitors popped up, changing the retail landscape entirely.<\/p>\n
Erv\u00e9r says the steps he put in place are helping H&M deal better with the new environment. He whittled away layers to take decisions faster, streamlined the number of suppliers, bringing more of them closer to Morocco and Egypt from China and Bangladesh \u2013 and got designers to scale up products. That\u2019s helped bring down H&M\u2019s inventory-to-sales ratio to the lowest level in 10 years, and prepared it to better take on \u201cbrutal, tough competition, and competitors that come from all directions,\u201d he said.<\/p>\n
\u201cWe have higher ambitions for growth over time \u2013 to drive both our customer value and shareholder value \u2013 by starting to grow more than we have done in recent years,\u201d he said.<\/p>\n
A decade ago, H&M and Inditex were seen as peers. The two generated broadly comparable earnings in the early 2010s. In market value, however, Inditex started to break away after around 2012.<\/p>\n
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By\u00a02016, growth at the Spanish group took\u00a0off while\u00a0H&M fell behind. The\u00a0gap widened\u00a0further in the years that followed, particularly after the pandemic. Inditex\u2019s margins rebounded strongly and remained structurally higher as its more nimble model helped it pull ahead. Today, Inditex has roughly five times H&M\u2019s profit. While Erv\u00e9r has struggled to revive operating margins to 10%, Inditex\u2019s are closer to 20%.<\/p>\n
After a decade of missteps, investors want H&M to show it can sell more at full price, avoid inventory pileups that force fire sales and sharpen its brand \u2013 all while competing with ultra-cheap online rivals and an increasingly upmarket Zara.<\/p>\n
On Erv\u00e9r\u2019s watch, inventories have come down sharply and online operations now account for roughly 30% of sales. Store numbers have been slashed 19% from their 2019 peak, including the closure of all 130 acquired Monki shops. The core H&M brand has 832 fewer stores, with consolidation into larger flagship-style outlets \u2013 a newly renovated store on Stockholm\u2019s Hamngatan, just blocks away from its headquarters, is set to reopen soon.<\/p>\n
But all that may still not be enough, says Charles Allen, a Bloomberg Intelligence analyst. \u201cInventory days are still above 130, which is much higher than they were historically and compare unfavorably to Inditex, which is below 90,\u201d he said. \u201cSo this suggests there is still some excess inventory. On balance I think there is more clearance to be done.\u201d<\/p>\n
In its report The State of Fashion 2026, consulting firm McKinsey places H&M in the value segment, alongside players such as Uniqlo. The report also points to a broader shift across the industry: value brands are upgrading their offer to compete with ultra-low-cost rivals like Shein and Temu, while mid-market players such as Zara are leaning into \u201caffordable aspiration,\u201d with a stronger focus on design and quality.<\/p>\n
\u201cFundamentally, Inditex has pulled ahead of H&M by having a higher degree of its own production located closer to the customer, meaning shorter time-to-market,\u201d said Soderfjell. \u201cMuch of what H&M has done in recent years has been to move closer to the Inditex model, but is that enough to regain the positions they have lost?\u201d<\/p>\n
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How H&M navigates that balancing act will depend in large part on the Persson family, which has been steadily accumulating an ever-increasing stake in the company. With a net worth of about $23.4 billion, according to the Bloomberg Billionaires Index, the family now controls more than 86% of H&M\u2019s voting rights \u2013 sparking speculation that the company will eventually be taken private.<\/p>\n
\u201cI don\u2019t want to speculate; I think very little about that question,\u201d Erv\u00e9r said. He said he works closely with the family and is in regular contact with Karl-Johan Persson, who served as CEO until 2020. \u201cWe meet every week, and we talk on the phone several times a week,\u201d he said.<\/p>\n
As international investors have thinned out, the company has become more tightly held, with limited external pressure to force faster change. That gives H&M unusual latitude for a listed retailer. It can invest in supply-chain changes and brand repositioning over a longer horizon, without the pressure to deliver immediate results. But that double-edged sword also removes an external catalyst for more radical action.<\/p>\n
The key question is not whether H&M can change, but how quickly. A decade after it first fell behind Zara, the company has stabilised. The next phase will determine whether it can do more. As supply chains are reshaped and competitive pressures intensify, H&M\u2019s ability to balance speed, price and brand will determine whether it can grow and rebuild margins \u2013 or remain stuck between the two ends of the market.<\/p>\n
\u201cWe are doing a very long-term, extensive job of building a stronger H&M,\u201d Erv\u00e9r\u00a0said.<\/p>\n
Investors, meanwhile, are saying: show me.<\/p>\n
\u00a9 2026 Bloomberg<\/p>\n
#Swedens #top #company #HMs #struggling #sell #rebound #story<\/p>\n","protected":false},"excerpt":{"rendered":"
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