Slowing demand amid economic uncertainty

Swedish fashion giant H&M published weaker-than-expected financial results for the second quarter of 2025 on Thursday, with the key figure — a year-over-year decline in revenue — highlighting a troubling trend in the retail sector. The company pointed to increasingly cautious consumer behavior, driven by a combination of economic uncertainty, geopolitical tensions, and erratic trade policy from the Trump administration. While H&M management maintains a pragmatic tone and emphasizes operational flexibility, the actual performance reflects growing global market complexity.

Financial data: Revenue misses expectations, operating profit down

For the quarter ending in May, H&M reported revenue of 56.7 billion SEK (approximately $5.99 billion), down from 59.6 billion SEK in the same period last year. Analysts had expected revenue of 57.0 billion SEK, making the results a negative surprise. However, in local currencies, sales actually increased by 1%, indicating that exchange rate fluctuations played a significant role in weakening the consolidated report.

Operating profit also fell sharply — from 7.10 billion SEK to 5.91 billion SEK — though it slightly exceeded the forecast of 5.88 billion SEK. The drop in profitability comes despite supply chain optimization and pricing adjustments implemented in response to changing demand patterns.

Consumer caution: Inflation, tariffs, and geopolitical uncertainty

In a formal statement, CEO Daniel Erver said, “The current period is characterized by uncertainty, and consumers are approaching purchases with caution.” This trend is not unique to H&M — retailers worldwide are facing reduced consumer enthusiasm, particularly in the U.S., amid renewed inflation fears and growing recession concerns.

The Trump administration’s trade policy further fuels uncertainty: frequent tariff announcements make it difficult to forecast future costs, prompting both consumers and retailers to delay spending and investment decisions. H&M stated that it is “closely monitoring developments in global trade and potential trade restrictions.”

Business response: Operational flexibility and a cautious June outlook

Despite the challenging environment, H&M emphasized its ability to adapt to changing conditions. The company noted, “With strong flexibility in the supply chain and adjusted pricing strategies, we have the ability to respond effectively to market shifts.”

Accordingly, H&M expects a 3% increase in June sales, measured in local currencies — an early indication that the negative trend may be leveling off in the short term. However, this forecast remains modest compared to the company’s historical performance.

Trend analysis: Lower revenue, but local-currency growth

The gap between declining revenue in Swedish krona and the slight growth in local currencies suggests that technical factors — such as currency appreciation — played a key role in distorting the consolidated results. Still, the sharp drop in operating profit highlights a deeper issue: margin erosion, potentially due to rising production, logistics, or inventory costs.

The tension between modest local performance and weaker consolidated outcomes underscores the challenges of running a global retail network and highlights H&M’s exposure to external forces beyond its control — including exchange rates, regulatory conditions, trade barriers, and consumer sentiment.

Conclusion: Challenging environment with cautious signs of stabilization

H&M’s second-quarter results reflect the complexity and challenges faced by the company — and by the global retail sector as a whole. While the company’s leadership continues to stress operational flexibility and process optimization, the data point to cautious consumer behavior, falling revenue, and thinner margins.

Although the June forecast suggests a slight rebound, it does not yet signal a full turnaround. As long as core threats remain — including inflationary pressure, aggressive tariff policy, and recessionary fears — H&M will need to take proactive measures to maintain relevance, efficiency, and profitability in an evolving global landscape.