^{Photo: Bloomberg.com}

H&M Delivers Surprise Upside in Q3

Shares of H&M surged on Thursday after the retailer reported fiscal third-quarter results that exceeded market expectations, fueling optimism around its ongoing turnaround strategy. By mid-morning in London, the stock was up more than 10%, reflecting renewed investor confidence in the company’s restructuring efforts.

Operating Profit Surges Beyond Forecasts

Operating profit for the quarter climbed 40% year-on-year, reaching 4.9 billion Swedish krona ($522 million). Analysts polled by LSEG had expected only 3.7 billion krona, making the result a significant beat.

Net sales for the period from June to August totaled 57 billion krona, narrowly ahead of the 56.8 billion forecast. While topline growth was modest, the profit margin improvement highlighted the company’s sharper focus on efficiency and disciplined cost management.

Turnaround Strategy Under CEO Daniel Erver

Since taking over as CEO earlier this year, Daniel Erver has doubled down on efforts to streamline H&M’s operations. The strategy has included:

• Reducing supply chain costs by optimizing sourcing and logistics.
• Accelerating digital transformation to boost online sales.
• Improving store efficiency by closing underperforming locations while investing in top-performing markets.
• Enhancing fashion appeal with trend-led collections to compete more effectively against rivals like Zara, Shein, and Uniqlo.

The early success of these initiatives is beginning to show, with improved profitability signaling that the turnaround may be gaining traction.

Competitive Landscape and Market Outlook

H&M’s performance comes at a time when fast fashion faces increasing pressure from inflation, shifting consumer habits, and competition from low-cost online platforms. Despite these headwinds, H&M has managed to maintain market share across Europe and is seeing growth in North America and Asia.

According to industry analysts, the company’s cost-cutting measures are projected to save around 2 billion krona annually, which could provide a buffer against macroeconomic uncertainties and rising raw material costs.

Investor Sentiment Strengthens

Thursday’s rally marked one of H&M’s strongest single-day stock performances in recent years. The company’s market capitalization rose by billions of kronor in early trading, signaling renewed investor faith in its long-term prospects.

Many analysts note that sustained profitability improvements, along with continued execution of Erver’s strategy, could position H&M as a stronger competitor in the global fashion sector.

Looking Ahead

H&M has set its sights on achieving a 10% operating margin by 2024, a goal that will require consistent execution of its turnaround plan. With cost savings already visible in Q3 and consumer demand stabilizing in several regions, the company appears to be moving in the right direction.

As the fashion industry braces for a competitive holiday season, all eyes will be on whether H&M can sustain its momentum and continue delivering stronger-than-expected results.