H&M said on Thursday that operating profit in its fiscal fourth quarter - the period that includes the crucial Black Friday weekend - rose to 6.36 billion crowns ($723.5 million) from 4.62 billion a year earlier, surpassing the mean analyst forecast of 5.53 billion in an LSEG poll. The company reported an organic sales increase of 2% in the period and said the operating margin widened to 10.7% from 7.4% a year ago.
"Through a strengthened customer offering, good cost control and improved inventory productivity, we continue to take important steps towards all our long-term targets in a challenging environment," CEO Daniel Erver said in a statement.
Despite the quarter's profit beat, H&M flagged weaker sales at the start of the winter season. The group said it expects December and January sales measured in local currencies to be down 2%.
H&M attributed the softer December performance in part to very strong demand during Black Friday in November, which it said led to subdued demand the following month. The company also noted that Chinese New Year, which falls in February, weighed on sales comparisons.
Analysts had anticipated only modest sales growth in the fourth quarter as consumers in many markets continued to exercise caution with spending. H&M has faced challenges growing sales as online competitors such as Shein draw shoppers with very low prices while larger rivals like Inditex's Zara occupy the more upmarket segment of fast fashion.
While investors welcomed the margin improvement in September, some analysts have said that a full turnaround hinges on management's ability to rekindle sales growth across the group.
The company proposed a dividend of 7.10 crowns per share for 2025, up from 6.80 crowns for 2024. That proposed payout was above the 6.83 crowns that analysts had expected in the LSEG poll. ($1 = 8.7903 Swedish crowns)