H&M holds firm on US prices as Zara and Shein raise theirs amid tariffs

H&M is aiming to attract U.S. shoppers by keeping prices stable, while rivals Zara and Shein raise theirs in response to rising tariffs. The fast-fashion sector, heavily reliant on low-cost imports from China, Vietnam and other Asian markets, is under pressure as trade disruptions reshape sourcing strategies.

H&M CEO Daniel Erver said on Thursday that constantly changing tariffs had created turbulence, with the world’s second-largest listed fashion retailer planning for multiple scenarios.

In an interview, he told Reuters that the challenge in the coming months is “to understand the consumer sentiment, which we see has dropped in the U.S. due to all the turbulence… with the fact that some will be forced to raise prices more, and what [that creates] as an opportunity.”

“Different competitors are acting in different ways, some more aggressively, some more cautiously,” he added.

H&M has around 500 stores across the U.S., its second-largest market after Germany in terms of sales, accounting for 13% in 2024.

As U.S. tariffs drive up costs for retailers, pricing strategy has become a top priority for executives. The timing of any increases is critical, with companies closely monitoring competitors to see who will adjust first.

For H&M, which is trying to improve its profitability, sticking to current prices for longer carries risks as rising costs eat into margins. However, it also provides an opportunity to take market share from rivals.

“Maybe they are going to raise prices in the U.S… but just to a lesser extent as compared to competitors,” Pareto Securities analyst Alexander Siljestrom said.

H&M can also mitigate the tariff impact by shifting production of U.S.-bound clothes from China, which faces the highest tariff rate, to Bangladesh and elsewhere, he said.

According to data from price-tracking firm Edited, the average U.S. price at H&M’s bigger competitor, Zara, was up 28% this month from a year ago across categories including dresses, jeans, and shirts, while prices at H&M in the U.S. were, on average, down 3% year-on-year.

Zara prices were up across the board in June compared to January this year, Edited found, while H&M has kept prices more or less stable, even though its Chief Financial Officer Adam Karlsson said in March that price hikes were likely to offset tariffs.

Shein, which sends clothes directly to U.S. shoppers from factories in China, has also had to raise prices and suffered weaker customer growth since Trump ended the “de minimis” duty-free treatment of low-value parcels.

Sourcing from fewer, closer suppliers

As it aims to improve its supply chain and get new styles to stores faster, H&M has spent the last 18 months consolidating its supplier base, Erver said, aiming to order more from a smaller number of large suppliers who also operate factories in multiple countries.

“We look at each individual order to decide what’s the best sourcing market depending on the craftsmanship, the skills, the pricing situation, but also now more than ever, the geopolitical situation with trade barriers,” he told Reuters. “That has led us in certain cases to take the decision to move things to different markets.”

H&M also aims to be below full capacity with all of its suppliers, so it can easily increase production if needed when an item sells well, Erver said.

As part of its “nearshoring” strategy of sourcing products from suppliers closer to main consumer hubs, H&M is looking to increase its supplier base in markets like Turkey, Egypt, Jordan and Morocco for Europe, Erver said.

H&M will also add suppliers in Brazil, where it is opening its first stores in the second half, he added.