HNNMY (HNNMY) Q3 2026 Earnings Report, Transcript and Summary

Good day, and thank you for standing by. Welcome to the H&M Group 9 Month Report 2026 Webcast and Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Joseph Ahlberg Head of Investor Relations. Please go ahead.

Good morning, and a warm welcome, everyone. Today, we present the third quarter results for 2026 for the H&M Group. My name is Joseph Ahlberg, and I'm Head of Investor Relations. Before I hand you over to our CEO, Daniel Erver, I'd like to share this morning's setup. Daniel will start with a brief summary of our results and progress. Then our CFO, Adam Karlsson, will provide some details on the financials. And after that, Daniel will share a brief outlook. We will then open up for a Q&A session where Daniel, Adam and I will be available to answer your questions. With that, please welcome Daniel.

Good morning, everyone, and thank you for joining us today. In the third quarter, we continued to strengthen the H&M Group. We delivered a strong operating profit and a return to growth. The operating margin for the quarter reached 10.6%, and this includes a positive one-off effect of approximately 1.6 percentage points relating to tariffs and import of goods that increased the cost of goods sold in previous quarters. The improvement is clear. Looking at the 12 months, the operating -- rolling 12 months, the operating margin is now at 9% versus 7.2% for the same time last year. I'm happy to see that our summer offer has been well received and that it contributed to sales improvement, particularly towards the second half of this quarter. Overall, net sales increased by 1% in local currencies, while they were still somewhat affected by logistic disruptions. For September, we expect a sales growth of 1% compared with the same period last year. And before we dive into more progress from the quarter, I'd like to share some of the fashion highlights from this quarter in this short video. So please enjoy. [Presentation] Our strategic priorities remain product, experience and brand. Here is where we can make the biggest difference for our customers. Every day, we compete for customers' attention, and we need to deliver our best, deliver the most relevant experience in every touch point, whether it is in one of our digital channels, in some of our flagship stores across the globe or in any of our stores across the world. So to support these priorities, we further strengthened a number of key enablers. We continue to develop our sourcing capabilities. We are empowering our teams closest to our customers, and we are becoming increasingly data-driven to support better and faster decisions across the business. We are not yet where we want to be, but step by step, we are firmly building a faster and more flexible and customer-focused H&M. With a growing share of in-season buying and shorter lead times, we increased our flexibility and our ability to respond to changing customer needs and trends. This way, we can improve the precision of our offering, create more attractive assortment and increase the share of full price sales. To deliver even greater value for money, we also continue to invest in product quality and durability. Delivering a stronger customer offer requires progress across the entire value chain. And as our organization of fewer layers comes into place, we empower our colleagues to make decisions closer to our customers in all of our 82 markets. In parallel, the investments we make in data, technology and AI to strengthen our ability to become more efficient in product design, sourcing and product flow, but it also helps us to become more personalized across our different touch points. We want to make a real difference in how our customers experience H&M in stores and online. Our omni model is a fantastic platform. It allows us to continue to build strong and direct relationships with our customers. And as we invest in the most attractive locations, we close the least productive ones and we upgrade existing stores and expand into new markets, we continue to improve the productivity of our store portfolio. We also continue to invest in technologies that helps and improves the customer experience and the way we operate our stores. Through the extended use of RFID technology and the extended rollout of self-checkouts, we make it easier for our customers to find what they're looking for and complete their purchases. Together with a more relevant assortment in each store and increased personalization across our digital channels, these efforts create a more relevant and seamless customer journey for all of our customers. To further strengthen our brands and deepen customer engagement, we continue to combine in-house design with strategic collaborations and partnerships. On the left-hand side of your slide, you see how H&M showed up even stronger this year at the London Fashion Week last Thursday night with a high impact and reach in social media, presenting our in-house autumn/winter collection ready to buy right away, creating lines outside of our flagship stores all across the world on Friday. And this autumn comes with a line of really exciting collaborations such as Wardrobe NYC, what you see here in the middle, Ellie Sab, as you can see on the right, and H&M Home's Kelly Wearstler collaboration, where we're making great fashion and design accessible to more customers. We are also evolving the way we build our brands and connect with our customers by growing our digital and creator-led approach to marketing. By increasingly working with digital creators and more authentic content, we can reach a broader audience while remaining relevant to different customer groups. This helps us build stronger engagement and bring our fashion to life with trusted voices. I will now hand over to Adam for a deeper look at the financial numbers. Adam, please go ahead.

Thank you, Daniel, and good morning, everyone. As Daniel highlighted, net sales developed in a positive direction in the quarter and increased by 1% in local currencies. If we look at the year-on-year numbers, we saw strong growth in the Nordic region, supported both by a stronger consumer environment and also improvements, of course, in our customer offering. In local currencies, sales grew in all regions, except Western Europe. And here, market conditions continued to be affected by cautious consumers and a high level of promotional activity, particularly in Germany and the U.K. It is also positive to see that Portfolio Brands returned to growth as sales increased by 3% in local currencies. We have seen a continued solid profit development in the quarter. The gross margin came in at 54.0%. And as I said, it included a positive one-off effect of approximately 1.6 percentage points related to tariffs and goods imports. And in addition, and as a reminder, last year, we had a positive impact on the gross margin development related to exchange rate movements on group internal receivables and liabilities. Taken together and adjusting for these 2 effects, the underlying gross margin continued to improve year-over-year, and that reflects the long-term improvements we've made in our sourcing. External factors, however, had a slightly negative impact, and that was driven by higher cost for transportation, while markdowns were in line with previous year. So thanks to good cost control, but with higher costs related to the upgrade of our digital infrastructure, selling and administrative expenses decreased by 1% in the quarter, both in Swedish krona and local currencies. So if we look at the longer-term picture, the improvement in profitability and our operational foundations are clear signs of progress in building a stronger and more resilient H&M Group. As you can see here in the graph to the left, we have continued to improve our operating margin on a rolling 12-month basis, reaching 9% with a support from a gross margin of 54.4% and bringing us closer to our long-term operating margin target of 10%. The main drivers behind this improvement have been better sourcing, strong cost control and more efficient ways of working across the business. Moving then to the right-hand side of the slide, key value drivers such as return on capital employed and earnings per share are also continuing to improve. Return on capital employed by 18% and EPS by 23%, both on a rolling 12 months. This reflects not only stronger profitability, but also a business that is deploying capital more effectively. And key levers are here, a more integrated supply chain, a higher share of in-season buying and a closer collaboration across our channels. And while our work with inventory productivity continues, our inventory value increased by SEK 1.4 billion by the end of the third quarter compared to last year. And important that this should be seen in the context of more goods in transit as a result of the disruptions in both global supply chains and the temporary effects related to the consolidation of the European logistics network. And as a reminder as well, we had prudent buying for the U.S. during the second half of 2025. So let me give you a brief recap of our financial outlook before I hand back to you, Daniel. For the fourth quarter, we expect external factors to have a somewhat negative impact on gross margin compared with the same period last year. And this is then driven by higher transportation costs as already seen in Q3. Markdowns are expected to be somewhat higher in the fourth quarter than the same period last year, and this is primarily driven by expectation of a high promotional activity in November and the calendar effect of Cyber Monday falling into Q4 this year. And in addition to that, the inventory levels entering Q4 are affected by goods being shifted into the opening balance for Q4 as a result of the delays in Q3 this year. And as I already mentioned, the prudent buying in the U.S. for the second half of last year. Turning to SG&A. We have demonstrated a solid cost control throughout the year. And based on the outcome with 1 quarter remaining, we are narrowing our full year guidance for SG&A growth in local currencies to at the lower end of the guided range. On CapEx, we have many ongoing projects expected to add to CapEx in Q4, and that gives a back heavy activation profile. Our current prediction is that we will end up at the lower end of the guided CapEx range for the fiscal year. And then finally, on cash flow, I mentioning that the majority of the remaining provisions recognized in the second quarter of 2026 are expected to be settled in the fourth quarter. And with that, I'll hand back to you, Daniel, for a short business outlook.

Thank you, Adam. We have done a great deal over the past few years to build the foundation for a stronger and more resilient H&M Group. And our focus remains firmly on product, experience and brand. Through these priorities, our ambition is to create an even greater customer value and continue to strengthen our customer offering. To achieve this, we are step-by-step increasing the speed and the precision across the value chain. We do this in our supply chain while we give our colleagues more mandates to act. We are becoming more data-driven, and we are scaling up the use of AI. We have more work to do, but we are encouraged by the progress that we are making, and we are very grateful and I'm very grateful for the team who works really hard every day to make H&M stronger. And we remain confident that the initiatives that we are putting in place will continue to strengthen our customer offering over time. With that, thank you so much for listening, and I will now hand over to Joseph and the Q& A.

Thank you, Daniel. We will now start the Q&A. Please state your name before asking a question and try to limit yourself to 1 question at a time with a maximum of 2 questions per participant, so we can answer them 1 by 1 make sure that we have time to answer all of your questions. Over to you, operator to finish the questions, please.

[Operator Instructions] And your first question today comes from the line of Magnus Raman from SB1 Markets.

I have 2 questions. And starting with the first one, the dynamics of your ERP investments. So because you have been delivering impressive cost control in 9 months to date. And then the question is if you still stand by your expectation of single-digit increase in SG&A in local currencies for the full year? And also, if you could elaborate a little bit on the effects you expect on results in Q4 and also for how long the projected extra costs from ERP rollout will continue.

Adam here. So we still stand by our guidance, but we sort of narrowed the range then to somewhat above last year. So low single digits, so to say. So that is the still expectation. We are as also mentioned, focusing more towards the second half of the year on this ERP work that we do. So that will most likely still affect the SG&A for the full year to that extent. And also looking into the coming years, then this will not be done by the end of the fourth quarter this year. It will be a continuous work throughout '27 and also into 2028. So that is why we also speak about it that we need to continue to, of course, focus on the positives of it, but also be realistic that this will be a component of our financial plan for next year that is likely then to have an upward tick on the SG&A also for 2027.

Right, now has become low, but still the implicit sort of effect in Q4 should be quite sizable from how I calculate if you're going to reach a positive figure there. Nevertheless, okay, the second question here is about -- you mentioned here also in the report about disruptions in your supply chain that you have experienced during the quarter. And maybe you could also comment on your own consolidation of your European logistics network. When do you expect that to be finalized? So the first is what type of disruptions you have experienced? And the second part, when you expect to be finalizing your own consolidation efforts?

So this is Daniel. We have seen 2 different types of disruptions. One is related to the global supply chains, a lot related to the situation in the Middle East, where we get disruption and delays on global shipping supply chain lines as well as the ability to use air freight is compromised by the situation. So that meant that we had some delays for goods that were supposed to be delivered in Q4 coming into Q3, some delays of goods within Q3 and then some delays of goods. And then we've preponed deliveries of goods into Q4 to mitigate for these delays, which is the explanation of the year-over-year increase of the stock levels. The second disruption relates to what you mentioned, the consolidation of our European warehouses, and that's an ongoing work that will continue. We've had during the second quarter, the third quarter and some effects in the beginning of the fourth quarter effects related to the closure of our warehouse in Belgium, and that has affected mainly Southern Europe, and we had somewhat of an effect of the performance top line in the third quarter -- in the beginning of the fourth quarter, but we are now catching up, and we are now sort of seeing that those effects should wear out during the rest of the fourth quarter.

And your next question today comes from the line of Daniel Schmidt from Danske Bank.

Can I just maybe touch on the full year sales effect from the store optimization that you're doing is still expected to be slightly positive for the year. I think it was slightly negative in the first half. What was the outcome in Q3? And if that was negative, I guess that leaves a lot to be happening in Q4. Is that the way we should interpret it?

No. So the net effect that we guided for the full year is the effect from openings, from closures and as well as stores that are being closed for rebuilds during the period of time. The net effect for the second half of the year is slightly positive. So we had a slightly positive effect in the third quarter from that optimization work that we see will also happen in the fourth quarter.

And should we read it as that you had a slight positive in Q3, you mentioned that. Is that going to be more than a slight positive in Q4 then in order to compensate for the slight negative in H1?

I will see a similar level to what we saw in Q3, but we estimate the effect for the year to be slightly positive.

Okay. And then you guide, of course, on external factors. But you don't mention internal factors that we have talked quite a lot about in terms of consolidating the supply base and Tier 1 and Tier 2 suppliers and the effects that you've gotten out of that. And you mentioned that a quarter ago, I think, or 2 quarters ago that, that's still going to be -- it would be peaking in H1, but it's still going to be a positive effect for H2. Is that still the fact?

That work continues, and I believe we spoke about it also last quarter actually that we're sort of moving that process backward in the supply chain to also more clearly include material suppliers and further down in the supply chain. So that work continues. What we have also communicated is that we have sort of at least a medium-term target range of the gross margin. And as we are now on a rolling 12 basis starting to operate within that, we are starting to more clearly use the internal effects to also add value to the product, so to say, to reinvest that opportunity. So it will be lesser of a gross margin expansion driver, but of course, an important part to continue to create strong value for the customer. And mitigate the pressure on external factors. Yes, of course, yes.

Yes. And what is still a positive effect from it in Q3?

A slight positive effect mitigating the negative parts and our continued efforts and the results of that -- those efforts in our own sourcing operations.

We will now go to the next question, and the question comes from the line of Fredrik Ivarsson from ABG Sundal Collier.

Maybe a brief follow-up on the latest question. You obviously have done a bunch of good work on the gross margin side with the supplier optimization program and so on. How much of this is yet to be done? Do you see more upside and more potential in that sense?

We continue to, as Adam mentioned, to see further opportunities also going into the material side of it. We see more opportunities for consolidation. So the supply -- the sourcing work will continue to be a very important piece of how we mitigate the negative effect on the external factors as we move ahead. But as Adam also mentioned, we are now in the gross margin interval, which we see as a sustainable interval, which we will sort of geared towards staying in for the rest of the year as we mitigate the external factors, but also invest in the product offering. Then looking forward, we also look at the different supplier base, and we are shortening the lead times. And when we look at suppliers with shorter lead times, a bigger part of the gain comes not from the -- both gross margin, but from the realized margin from sales by having a higher sell-through as well on full price, and that would be more important for us as we move ahead with a higher share of close market and fast source products and assortments.

Perfect. And then if you could comment on where you are in terms of the new more flat organization, -- are all those processes in place? And what have your sort of initial reflections been?

So we have had a couple of go-lives across the world depending local regulations and what's possible. So the first batch went live in the beginning of summer. We had another majority going live coming into the autumn. So to the very vast extent, we are now live with the new organization across all our markets with 1 or 2 markets still being the exceptions. We see that already that is really positive that we have eyes and ears looking for potential and identifying opportunities in our offering and the way we set up our stores, the way we operate our business close to customers across the 82 markets. And it is an opportunity for us to combine the strength of a global company and all the muscles we have with the local relevance. So we are starting to see early positive indications of being more close to the customer to be more relevant. But then, of course, a large organizational change means that we are putting new teams in place. There is a sort of a start-up phase, the teams that are getting to know the markets that weren't placed in the market before. So of course, there is a start-up lag to it also. But when it comes to the implementation, we are more or less fully there with the new organization.

And your next question today comes from the line of Niklas Ekman from DNB Carnegie.

Can I ask about the external factors? When you talk about some negative effects in Q3 and you say something similar about Q4, can you elaborate at all on the magnitude, I guess, both for Q4 and I guess, coming quarters as well? Are you seeing the negative effects from Q3 worsening in Q4 and kind of going into H1 of '27? Or is it about the same level?

This is Joseph speaking. For Q3, we saw that external factors added up to a net negative effect of -- that was somewhat worse than expected. And the main driver of this development was the increased freight costs year-over-year. That was the main moving factor explaining this development for the third quarter. And our guidance for Q4 is for markdown to also then increase somewhat year-over-year. And it's the added freight cost that is the key driver here. So that's the comment we make about similar development as what we saw there in the third quarter. Then, of course, we will -- we expect to also see material prices creating a headwind towards the end of this year, but coming into more effect into 2027.

Okay. But there's no dramatic shift in the coming quarters with headwinds increasing. It's still of a fairly similar magnitude as Q3.

That is a fair summary, yes.

Very good. And also talking about markdowns, when you one of slightly higher markdowns now in Q4, and you're highlighting Cyber Monday. Is that the only reason for higher markdowns? Or is there anything in your inventory that -- or general campaign activity? And kind of as a follow-up on that, I guess the timing of Cyber Monday should also be positive for sales. And I think last year, you lost 1 percentage point of sales in Q4. So all else equal, you should possibly gain 1 percentage point of sales in Q4 this year.

So I'll start with the markdown. It is -- the main effect is the shift of Cyber Monday. Then as we mentioned, due to the global supply chain disruptions, we've had delays of incoming, which is not optimal for the timing, we want garments to arrive at the right time for -- to be really relevant for the customers. So we have an increased stock level to manage also due to that. That stock is very fresh because the stock that was bought to come in, in Q3 that was slightly delayed during Q3 or slightly preponed into Q4 to mitigate, but it's also -- it's a stock level that we will need to manage during the quarter that is partially affected and coming from the global disruptions and the delays. Adam, I don't know if you want to elaborate on the calendar effect further.

No. But you're right that it will be 1 more day, sort of say, of selling in November this year compared to last year. So that all other things equal should be somewhat positive on the financial 2026.

I think the estimated impact you mentioned there, Niklas, is probably on the high side. So a positive for November, but not a significant impact on the quarterly sales outlook coming from that Cyber Monday falls into November this year.

We will now take the next question, and the question comes from the line of Richard Chamberlain from RBC.

Two from me, please. Just in the statement, it says that exchange rate changes for intra-group payables and receivables had a neutral impact on the quarter's gross margin while the same quarter last year was positively affected by exchange rate gains. Can you give a sense of what the difference was there year-on-year in terms of exchange rate impacts on the gross margin that you referenced in the report?

This is Joseph. Yes, last time, we did call out that we had an unusually large FX effect that you described here, Richard, with the revaluation of intercompany receivables and liabilities. This year, we didn't have such an impact of revaluation. It was, again, demonstrating that last year was an outlier in that sense. And referring back to Adam's comment made earlier, we had a -- in the quarter, a positive impact from the tariff adjustments of 160 basis points and adjusting also for this FX effect in the comp base, it takes our underlying gross margin to a slight improvement year-over-year.

Understood. Excellent. Okay. And the other one is just on the tariff refunds. How far do you think you are through the sort of process of receiving those? I mean is that broadly going to sort of mirror, I guess, the tariff costs that we were starting to see coming through last year. So it's going to kind of build a bit from here? Or how are you seeing the outlook for those tariff refunds in the next sort of couple of quarters?

Thank you for the question. This is Joseph again. We don't expect to see any further adjustments connected to tariffs in the coming quarters. We entered into a structured process in June, and that process was concluded in the quarter of Q3. So no further. Refunds expected.

Our next question today comes from the line of Georgina Johanan from JPMorgan.

I've got 2, please. The first one was just coming back to the point on OpEx. I just wanted to check my understanding. So am I right in sort of estimating that you're, therefore, looking for OpEx ex FX to be up around a mid-single-digit percentage in Q4, please? And I ask because just, of course, to help inform our modeling into 2027 in terms of that run rate that we should expect? That was my first one.

Joseph here to make a quick comment on that, George. Thank you for the question. If we look accumulated by Q3, we are on a flat development on SG&A in local currencies year-over-year. So we -- and back to Adam's earlier point, we expect to see an outcome for the full fiscal year at the very low end of the guided range of low single-digit growth. So I think that takes the Q4 projection to a lower growth rate than what you assume there, George.

Okay. Apologies. I thought 9 months was running at minus 1%, but perhaps I misread apologies. And then just the second one. Just to check, was there any timing impacts in either direction that impacted the current trading number? I think there was a slight shift of Labor Day in the U.S., please? And then if I've got time, I would love to know what you're seeing post the de minimis removal in Europe. And indeed, if that's causing any harder push of those Chinese players into the U.K., please?

On the first question here, we see no material effect of any sort of changes to trading days or so. So it's a fairly sort of normalized quarter. So nothing material. Of course, there are days moving, but nothing material to call out for the third quarter. And then I'll follow up on the de minimis and also on the fees that are being implemented in Europe, we see positive steps towards a more equal playing field where we can compete on equal terms, which we believe is great for customers that gives them the chance to get the best value for money and also can feel safe with the products they're buying. And so we see that as a positive step that is happening in both U.S. and Europe and we will continue further on into Europe. We see that -- at the same time, it's important to remember, we are acting in an industry, which is very, very fragmented, where we have no player having more than a low single-digit market share. So even if certain players then will have less of engagement and interest, it's still a very fragmented market. So the impact is -- has to be seen in that light. But we believe it's a positive step that we are creating competition on equal terms and that is great for customers across both Europe and the U.S.

Our next question today comes from the line of Sreedhar Mahamkali from UBS.

A couple for me as well, please. Daniel, I think in your comments, you mentioned you would look to maintain the normalized gross margins going forward, the 54% to 55%. Does that mean the headwinds that we are discussing into next year ought to be largely mitigated with some self-help measures to continue providing positive impact from supply chain consolidation and things like that? Second one is you also referred a few times in the call to increasing in-season buying. Can you just give us a sense of magnitude of change here? And anything you can fill us in on how you're changing proximity sourcing while addressing that?

So on the first question....

On the gross margin rate. Maybe I can start on that, and then you can fill in, Daniel. But of course, the ambition is, as we said, that the key lever of our margin target is to have a gross margin that is sort of normalized over time. But -- of course, we need to be at all times competitive in the market, create the most customer value. So this is for us to give an indication to sort of the target interval that we're steering and doing our utmost through our internal work to, of course, secure that we both give value to customers, but also mitigate external factors that might go in the other direction. But it's not sort of a given under all types of circumstances. So doing a sort of a normalized period with decent size of disruptions, we believe that this is a good level to maneuver within or a range to maneuver. But of course, given how the world sends uncertainty all of our ways, it's difficult to exactly predict where things are heading. But the target is that our internal work should mitigate those effects.

But as you said, Adam, the focus is always how do we create the absolute best value for money. And it's at this point in time, not easy to forecast all of the external effects and the pressure that we'll have. But over time, that's our target range. For the second question around proximity sourcing, we are increasing significantly the share of especially our fashion assortment that is being bought with shorter lead times. And that can be both proximity sourcing, but it can also be using a different type of supplier base and using different modes of transport to shorten the lead times to be quicker so that we can take later decisions. And specifically for -- particularly for the assortment that is more sensitive to current trends and changes in fashion, we have a significantly higher part of that assortment sourced later in season for the fourth quarter compared to the same period last year.

The next question today comes from the line of Matthew Clements from Barclays.

The first one, you mentioned that you bought cautiously last year for the U.S. It sounds like you were buying less cautiously for this second half, and that's a key driver of. Your inventory growth year-on-year. Is there a risk that you're buying more optimistically into a challenging U.S. consumer environment? That's the first question. And the second one is on your portfolio of brands, which have seen significant improvement and outperformed H&M brand. Focusing on cost in particular, can you just give us some color around how cost is performing and perhaps when it starts to make sense to break out that performance and start to talk about it a little bit more transparently?

So on the first question, we had a very cautious plan for the U.S. last year. As we mentioned in the last quarter report, we did see pockets of -- within price groups and garment types where we had the gap in inventory and weren't able to fulfill the customer demand. And now looking at the Q4, we have covered those gaps, and that is a significant piece of what is driving the increased stock levels. So we believe we are better set up for the U.S. to meet the customer with a good availability, and we're seeing some promising signs that, that is also resonating with the consumer. So then as always, we are very on our toes to monitor how the consumer is developing and what their needs and expectations are and we'll adapt quicker and with a more responsive supply chain, it gives us better opportunity to react. But for now, we're happy that we have set up the U.S. to better meet the customer demand so that they can come and find good availability for what they're looking at, at H&M. Portfolio Brands, it's positive to see that they are back to positive growth in the quarter. We are satisfied with the steps they're making. We're really proud of the journey that COS is on. COS has really found a great spot in the customers' mind and a good space to claim within the market, and they are continuing on that path, and they are being really appreciated by the consumer, and we see opportunities to extend and open further stores, but we don't have any plans of today to report their progress separate from the rest of our portfolio runs.

And your next question today comes from the line of Joffrey Bellicha Meller from Bank of America.

The first one is a follow-up on the comments you made on the de minimis effect in the duties in Europe. Have you already seen any small positive effects on market share gains over the summer from obviously these increased taxes? That's the first question.

We have different developments across the market. It's difficult to say where market share gains are coming from de minimis or not. We can see, for example, that we have a challenging environment in the German market, which is a very important market for us, but we are related to the market performing well and gaining market share. And we see also a challenging consumer climate in the U.K., but there we are not as satisfied with our performance and are putting a lot of efforts in place to strengthen our customer offering in the eyes of the U.K. consumer. So we have a different situation depending on markets. So I wouldn't read a direct relation to market share gains related to the de minimis or the tariff change.

And then the second question is more about the H&M brand. And I know you've done a lot of work on womenswear over the last 18 months. And I believe a couple of quarters ago or 3 quarters ago, you started talking about improvements in the menswear collections and the kidswear collections. I just wanted to hear a little bit where was the growth coming from at the H&M brand? Is it still mostly driven by womenswear? Or are you seeing any improvement or inflection in menswear and kidswear?

Thank you for the question. We are having a high pace of improvement and activities across the different customer groups to strengthen the offering and making sure that the width that H&M has offer has built some really strong separate components that makes one stronghold. And looking at the quarter, we are not satisfied with the sales growth of 1%, and that goes across the customer groups, so we could see more potential across the customer group. No single customer group was strong enough to push up the performance to a level that we would be satisfied with for the quarter.

We'll now take the next question. And the next question comes from the line of Mia Strauss from BNP Paribas.

I just have one just on your store optimization. Can you maybe give us some color as to how the stores that you've referred and you've made changes to how those are performing and whether you're satisfied with this performance?

So we are touching our stores in many different ways to make sure that we stay relevant. We are improving, as we spoke about, the technical infrastructure with, for example, RFID technology, self-service checkout to simplify the way the store operating, but we also do improvements into presentation to layout and of course, including full rebuild of completely updating the store space. So with the mix of these actions, we have touched approximately 1/5 of our portfolio so far. And in those stores, we see a positive reception from customers that are appreciating more clarity, more inspiration, better guided experience and also simplified and more convenient shopping journey. So that we take as a positive and encouraging sign to continue the work to work through our entire store portfolio. We also see the stores having a positive a positive impact on sales incrementally for those stores specifically, but with further potential to accelerate. And every store we rebuild or we touch, we learn what is really appreciated and what can be further accelerated into the rest of the portfolio. So that work will be ongoing with high activity throughout 2027.

[Operator Instructions] And our next question comes from the line of Samantha Conti from Women's wear Daily.

Can you hear me?

Yes, we can hear you loud and clear.

Excellent. I just wanted to know what the impact was of the Peter disruptions on the runway in the cost runway in New York and the H&M runway in London. What kind of impact did they have? And are you speaking to Peter? If you can just elaborate on that, please?

We believe it's really important that everyone has a chance to express their voice and have their voice heard. We are sharing the point of view that Peter has that no animals should come to any harm when we produce garments, and that is the belief that we share really share detail with Peter. We have an ongoing dialogue. We have had that for a long time. It's been a partnership where we have supported the development of the industry, and we will continue that ongoing dialogue moving forward as well. And then yes, I think that's what we see so far.

Can I just follow that up with? What kind of an impact does it have on the brand? Is this sort of a net-net positive for cost and for both for cost and for H&M, the publicity, the pictures, the headlines of Peter coming on to the runways. What sort of an impact does it have on the brand? Do you see any impact on brand sales?

As I said, we believe it's important that everyone gets a chance to express their voice and their opinion. And as I said, we also share the underlying purpose of that no animals should come to any harm when we produce garments. And then we focus on doing as well as we can to manage the shows in the best way as well as then managing how we build a more sustainable industry for the future.

That was our final question for today. I will now hand back to Daniel Erver, CEO, for closing remarks.

Thank you so much, and thank you to all of you for attending today's telephone conference and for your continued engagement with the H&M Group, which we truly appreciate. So quickly to summarize the quarter, we continue to strengthen profitability and delivered a return to sales growth. Our summer offer was well received and contributed to gradual improvement in sales development throughout the quarter. At the same time, we continue to take the important steps in building a faster, more flexible and customer-focused business. And these long-term efforts will continue to strengthen our customer offer and our ability to meet customers with relevant products, inspiring experiences and strong brands. We still have much left to be done, but we remain confident in creating long-term value for our customers as well as for our shareholders. And this progress would not be possible without the passion, the hard work of all of our committed colleagues across the world. And I'm really proud of what we are achieving together. So once again, thank you for listening, and we wish you all a really lovely day. Thank you.

Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.