Swedish retail giant H&M shuttered 135 stores in 2025, followed by another 163 closures during the first half of 2026. Overall, the network has shrunk by more than 600 locations since 2022, though it is worth noting that 172 new stores were launched in strategic markets during that same timeframe. Alongside these physical closures, the company discontinued the Monki brand entirely (56 stores), repurposing select spaces for Weekday, the group’s youth-focused flagship.
Winding down Monki is more than just a balance sheet adjustment; it represents a strategic retreat. Monki was H&M's attempt to capture the youth segment under a standalone banner, yet the company struggled to maintain the brand’s independence amidst stiff competition. The admission of defeat came in 2024, when the decision was made to fully integrate Monki into Weekday, relegating it to a retail line and an online presence.
These closures were far more than a simple adjustment—they signaled a total re-evaluation of a business model H&M had championed for two decades.
The new strategy is yielding results. Despite a 1% dip in sales during the first half of 2026, H&M’s gross margin climbed to 53.8% (up from 52.3% the previous year), while operating profit rose by 4%. This is not a desperate survival tactic, but a calculated restructuring: leadership has stated plainly that they are sacrificing short-term volume in favor of long-term profitability and a higher-quality store network. While Shein and Temu disrupt traditional fast fashion through rock-bottom prices and rapid speed, H&M is carving out a different niche by strengthening its brand, prioritizing digital channels, and catering to a more discerning consumer willing to pay a premium for reliability.
Shein and Temu are more than just rivals; they have established a parallel marketplace. Both platforms leverage real-time technology to bridge consumer demand with Chinese manufacturing capacity, allowing them to debut hundreds of new products daily at retail prices that sit below the production costs of traditional fast fashion. Shein rolls out between 500 and 2,000 new items every day, while Temu connects hundreds of thousands of suppliers directly to shoppers, cutting out all intermediaries. H&M, which for decades relied on physical retail and its own supply chains, is now facing a model where products appear in catalogs within days or weeks, rather than months.
Younger consumers, particularly Generation Z, are no longer visiting shopping malls for their new looks. With online sales now exceeding 30% of H&M's total revenue, this represents a fundamental shift for a chain with over 4,000 locations. Shoppers are gravitating either toward instant access to thousands of low-cost options (Shein, Temu) or toward brands with established heritage and quality (Zara, Uniqlo, and the premium segment). The middle ground—traditional mall-based fast fashion—is becoming obsolete.
H&M is attempting to navigate a path between these two extremes. The company is maintaining a physical footprint but shifting investment to cities and locations where brick-and-mortar stores remain relevant to the consumer. In 2026, H&M plans to open 80 new stores, primarily in Brazil, Paraguay, Malta, and Ukraine. The company is also investing in upgrading its remaining stores—improving design, integrating digital tools into the physical environment, and offering more personalized service.
The most significant transformation is not the store closures, but a fundamental change in logic. Clothing is no longer just a product to be felt in a shop and purchased once a season. Instead, it has become a stream—a flow of trend data, recommendations, and micro-purchases. While Shein and Temu profit from speed and sheer volume, H&M is betting on trust and profitability.
H&M is not disappearing. Its physical presence is becoming more selective, yet highly strategic. Whether H&M remains a prominent global player or fades into a regional retailer—displaced by nimble competitors on one side and luxury branding on the other—depends on its ability to simultaneously upgrade its digital capabilities (with a new IT stack planned for late 2026) and maintain high-quality standards. For now, the company is doubling down on profitability, a strategy that appears far more logical than trying to compete with Temu on its own turf.
