H&M warns prolonged Iran war could hit consumers hard

H&M warned on Thursday that ​a prolonged Middle East war could have a “significant impact” on consumer spending, potentially complicating the ‌fashion retailer’s efforts to catch up with rival Zara and discount Chinese brands.

Shares in the Swedish group slipped as much as 6.6% after soft March sales overshadowed a slightly bigger-than-expected rise in December-February profit thanks to tight cost control.

A jump in energy ​prices since the start of the Iran war has fuelled concerns over inflation and cooled consumer demand, threatening ​to pressure retailers.

CEO Daniel Erver said H&M had not seen a hit to overall demand ⁠so far, but warned a sustained crisis could have a “significant impact” on consumer behaviour.

“A continued conflict, such ​as with continued high energy prices, will create inflationary pressure on a consumer who already has tough inflationary ​pressure,” he told Reuters in an interview.

A lengthy conflict could also create “slightly additional” cost pressures, he added.

British rival Next said earlier on Thursday the war would likely dampen demand while pushing up costs and selling prices.

H&M, whose customer base is considered more price-sensitive ​than Zara’s has struggled to lift sales as shoppers cut back, caught between ultra-cheap online retailers like ​Shein and Zara dominating the upmarket end of fast fashion.

‘SOMEWHAT DISAPPOINTING’

H&M reported a 26% year-on-year rise in first-quarter operating profit to 1.51 ‌billion ⁠crowns ($162 million), beating the mean forecast of 1.39 billion in an LSEG poll of analysts. That marked a third straight quarter of rising profits, despite sluggish sales.

“Towards the end of the quarter our well-received spring collections contributed to a positive sales trend, which also continued into March,” Erver said.

Sales measured in local currencies fell ​1%, and H&M predicted a ​rise of 1% in ⁠March.

“Only 1% … is somewhat disappointing given management’s comments that the spring collection has been well received,” Alphavalue analyst Jie Zhang said.

Erver said the impact of the war ​on H&M had been limited by its small sales exposure to the Middle ​East, where stores ⁠are run by franchisees. It is also little affected by airspace closures as it transports most goods by sea and land.

Inderes analyst Lucas Mattsson said it was too early to speculate about the potential effects, but remained cautious.

“We ⁠don’t ​expect any particularly strong sales growth in 2026, precisely because they ​haven’t showed any clear trends or patterns on that yet,” he said.

($1 = 9.3424 Swedish crowns)