H&M Shrinks Asian Footprint to 886 Stores as Regional Sales Edge up 4 per Cent
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H&M Group closed 54 stores across Asia, Oceania and Africa over nine months to August. That trimmed its regional footprint to 886 locations. Regional sales for the quarter still rose 4 per cent.
Group-wide revenue for the three months to August 31 reached SEK 57.2 billion ($5.8 billion). That was an increase of just 1 per cent in local currencies, as a stronger Swedish krona erased top-line gains.
Operating profit climbed 23 per cent to SEK 6.04 billion, beating market forecasts of SEK 5.14 billion. The operating margin widened to 10.6 per cent from 8.6 per cent a year earlier. One-off refunds from US tariff payments accounted for 1.6 percentage points of that margin increase. The company confirmed those credits will not repeat in coming quarters.
Pruning the Asian Store Network
Physical retail space continues to shrink across Asia, Oceania and Africa. The regional network stood at 940 locations in November 2025 before net closures reduced the tally to 886 by the end of the third fiscal quarter.
Management has paired store closures with selective rollouts for higher-margin labels. The group introduced COS to India in October 2025. It is betting affluent urban shoppers will back premium concepts as core H&M outlets leave marginal shopping centres.
“We are able to get product from having a first rough idea to the customer in six weeks, and when we talk about shortening the lead times, it is about increasing the share that we buy in that way,” said chief executive Daniel Erver.
Online transactions now generate more than 30 per cent of total sales. That growth has accelerated the push to refit existing flagships. The company has modernised a fifth of its 4,000 global stores rather than adding floor space.
Rival Pace and Regional Margins
H&M faces pressure from both ends of the fashion market in Asia. Zara owner Inditex reported a 9 per cent sales increase in constant currency in August, outpacing H&M through rapid stock turnover.
“Operating profit climbed 23 per cent to SEK 6.04 billion, beating market forecasts of SEK 5.14 billion.”
Discount competitor Shein continues to capture budget market share across Southeast Asia and East Asia, squeezing the middle price bracket where H&M operates. Landlords in tier-two Asian malls face falling footfall. That drop leaves retailers with less bargaining power over fixed leases unless their sales density improves.
Shifting logistics hubs has added further friction. A warehouse closure in Belgium disrupted stock flows into international distribution channels earlier this year. Transport bottlenecks in the Middle East compounded those freight delays.
Decarbonising the Manufacturing Base
Supply chain costs remain exposed to rising energy expenses across South Asia. Fuel price hikes in Bangladesh, a major manufacturing centre for the group, prompted H&M to push suppliers toward renewable power.
Direct suppliers must complete the phaseout of coal-fired boilers by the end of 2026. This energy shift targets long-term operational resilience as regional fossil fuel tariffs fluctuate.
European logistics operations are also expanding through 2027 with new facilities. These hubs aim to shorten shipping cycles and improve product availability across digital channels.
The Next Trading Targets
Recent store closures follow a difficult 2025 fiscal year. H&M shuttered a net 105 stores across Asia, Oceania and Africa during that period, driving a 7 per cent reported revenue drop in Swedish krona terms.
Early autumn trading shows little acceleration. September sales are projected to grow 1 per cent in local currencies, matching the flat trajectory of the third quarter.
Investors and retail partners are watching the fourth-quarter gross margin to see if shorter lead times can protect full-price sales without discounting once temporary tariff credits vanish.
Questions & Answers
Q.What specifically caused the operating margin to widen to 10.6 per cent from 8.6 per cent?
What specifically caused the operating margin to widen to 10.6 per cent from 8.6 per cent?
The operating margin widened primarily due to one-off refunds from US tariff payments. These credits accounted for 1.6 percentage points of the increase, though the company confirmed they will not repeat in future quarters.
Q.How is H&M adapting its store strategy in Asia given the regional closures?
How is H&M adapting its store strategy in Asia given the regional closures?
H&M is closing stores in marginal shopping centres while selectively rolling out higher-margin labels like COS. They are betting on affluent urban shoppers backing premium concepts and modernising existing flagship stores rather than adding new floor space.
Q.What challenges is H&M facing regarding competition and logistics in Asia?
What challenges is H&M facing regarding competition and logistics in Asia?
H&M faces competition from Zara, which has faster stock turnover, and discount retailer Shein, which is capturing budget market share. Logistically, a warehouse closure in Belgium and Middle East transport bottlenecks have caused freight delays.
Q.How is H&M addressing sustainability and supply chain resilience in its manufacturing base?
How is H&M addressing sustainability and supply chain resilience in its manufacturing base?
H&M is pushing suppliers to shift to renewable power by phasing out coal-fired boilers by the end of 2026, especially in Bangladesh. This targets long-term operational resilience against fluctuating regional fossil fuel tariffs.
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