H&M cut its inventory 10% and it cost the company sales. CEO Daniel Ervér said the leaner stock position “in some cases affected our ability to fully meet demand.”
The miss is a warning for anyone running a lean-inventory strategy. Cutting stock only works if you know precisely which items to reduce. Ervér said H&M will upgrade its planning systems in the second half to get there.
The numbers: According to the company's Q2 FY2026 report:
Operating profit SEK 5.913B, about 7% below the SEK 6.38B analyst consensus
Net sales down 3.3% to SEK 54.828B, flat in local currency
Inventory down 10% YoY to SEK 34.942B
Gross margin up 120 basis points to 56.6%, which was the intended benefit of the inventory cut
The caveat: Morgan Stanley argues the headline miss was mostly driven by a one-time SEK 679 million restructuring charge, and that adjusted profit actually beat consensus. But the stock availability gap is real, and Ervér pointed to it directly.
The fix: Ervér flagged a second-half upgrade to H&M’s digital infrastructure to bring “greater precision in how we plan our assortment and stock-in-trade.” The data capability that should have supported the inventory cuts is arriving afterward.
The Zara contrast: Inditex turns inventory roughly twice as fast as H&M, about 5.1 times a year against 2.7, based on company' filings, and still sells more at full price. It does that through item-level RFID and a single inventory pool that shows exactly what stock to keep and where to move it. H&M is pursuing the same efficiency and is still working to match that level of precision. This quarter showed what the gap looks like.
