H&M turns a corner as turnaround gains momentum after closing 135 stores

H&M shares rose on Thursday after the retailer signaled that its turnaround was beginning to pay off in the latest quarter, with both sales and profits increasing as the company closed 135 stores over the past nine months. The world’s second-largest fashion retailer said the three months to the end of August showed early signs that its strategy is working, even as it faces stiff competition from Inditex and the online rival Shein.

For the quarter ended Aug. 31, H&M reported sales of £4.51 billion, a 2% rise from a year earlier, while group profit climbed by about 39% to £390 million, up from £280 million a year ago. The improved performance came amid ongoing efforts to streamline the business, including cost reductions and a accelerated store-closure program intended to rebalance the portfolio and sharpen the brand’s value proposition. Investors welcomed the results, pushing H&M’s shares up about 8.75% on the Stockholm stock market by mid-afternoon.

The company highlighted the closures as part of broader cost-control measures designed to weather a difficult retail environment. Of the 135 stores shuttered over the past nine months, 21 were located in Western Europe, a region that has long been a battleground for retailers seeking to preserve margins while preserving a broad footprint. Analysts noted that cutting stores and optimizing the mix can help stabilize profitability if accompanied by a stronger value-for-money narrative and more selective product offering.

Daniel Erver, H&M’s chief executive, said the improvement in profit underscored progress under the turnaround plan. “The increase in profit shows that we are on the right track as a result of the progress we have made in our plan,” he said. “In an environment of ongoing uncertainty with cautious consumers, all of us within the H&M group are consistently focusing on our customer offering—always giving the best value for money.”

The performance comes as the retail landscape remains highly competitive. Inditex, the owner of Zara and Pull&Bear, continues to press on as a global leader in fast fashion, while Chinese online challenger Shein has disrupted traditional pricing models and forced established players to rethink positioning. Investment and strategy firms have cautioned that the battle for consumer wallets remains intense, with shoppers increasingly prioritizing value, speed, and quality.

Russ Mould, investment director at AJ Bell, said H&M appears to be on a comeback trail. “It is making progress in a difficult retail environment, fighting off competition and upping its game with designs that encourage shoppers to keep coming back for more,” he said. “The emergence of discounters like Shein forced a rethink on positioning. H&M either had to go head-to-head with the discounters or reposition itself as a place to buy better quality items still at affordable prices but not rock-bottom ones. H&M appears to be choosing the latter path, and early evidence suggests the strategy is working.”

The company’s Tuesday show at London Fashion Week, featuring models such as Alex Iris Law and Lila Moss, underscored a broader pivot toward trendier, yet affordable, pieces designed to attract younger shoppers while maintaining price competitiveness. Industry observers noted that such positioning can help balance the demand for on-trend items with the brand’s historic emphasis on value.

Despite the improvement in the latest quarter, H&M faces ongoing macroeconomic headwinds, including consumer caution and volatility in foreign exchange and supply chains. The company has reiterated that the turnaround is gradual and contingent on maintaining competitive pricing, enhancing online sales channels, and continuing to prune underperforming segments. Analysts also point to potential upside from continued progress in loyalty programs and in-store experience investments that could translate into higher basket sizes and repeat visits.

As the world’s second-largest fashion retailer, H&M’s performance remains closely watched by investors seeking signs that the consolidation of its global footprint and a more selective approach to openings and closures can sustain margins amid intensifying competition. The company’s leaders have signaled that the core of the strategy will continue to focus on value-driven offerings and a more disciplined cost base, even as the fashion cycle moves in unpredictable directions.

With the summer quarter behind it, H&M will likely need to demonstrate that the momentum is sustainable through the remaining fiscal year. If the trend holds, the retailer could begin to translate early signals of improved profitability into steadier earnings and, potentially, a reaffirmation of its market position in a retail landscape that shows few signs of cooling off.