H&M shares soared thanks to strong earnings. Is it worth buying them now?

Quotes of the clothing retail chain H&M, one of the largest in Europe along with Inditex, made the sharpest jump in more than a year. Shares rose after the fashion retailer's quarterly profit beat forecasts, confirming the effectiveness of its strategy of focusing on H&M's core brand and strict cost control.

H&M shares soared 12% at the opening of trading on September 25 in Stockholm, showing the highest intraday growth in more than a year. Prior to that, since the beginning of 2025, the Swedish retailer's shares have added only 5% in value.

H&M's operating profit for the three summer months of 2025 (the third fiscal quarter for the company) rose 40% year-over-year to SEK 4.9 billion ($520 million) against a consensus forecast of SEK 3.7 billion. Net sales for June-August amounted to 57 billion kronor ($6 billion) - in line with market expectations, Bloomberg writes.

H&M's operating margin rose from 5.9% to 8.6%. Gross margin increased from 51.1% to 52.9% - while the share price in the market was expected to rise to 51.5%, says Swedish Financial Times' Dagens Industri.

For September, H&M expects sales volumes to remain at last year's level despite a high comparison base. The company said its fall collections were well received by shoppers. At 2024, the retailer's revenue in the first month of fall jumped 11% thanks to cooler weather and new brand positioning.

September sales are showing "solid momentum" and are slightly ahead of forecasts, Bloomberg quoted RBC Capital Markets analyst Richard Chamberlain as saying.

H&M's report for the three months of summer showed a much faster improvement in profitability than the market had expected, and columnist Julia Forsberg predicted that the stock should show "significant growth" - which it did, states Dagens Industri.

H&M shares are now trading 24% above Wall Street analysts' average target price of 137.38 krona per paper. The neutral (Hold) consensus rating on H&M stock suggests that experts suggest investors to maintain current positions and wait for new signals.

Earlier in September, Spain's Inditex, owner of the Zara brand and H&M's main competitor in the European market, gave a positive signal to the entire sector by reporting a stronger-than-expected start to fall sales. The Spanish retail giant has long outpaced H&M in terms of growth thanks to its optimized supply chain and faster collection updates.

This article was AI-translated and verified by a human editor