H&M's Inventory Glut Wasn't a Shein Problem. It Was a Currency Mirage and a Self-Inflicted One.

In January 2023, H&M reported that it was sitting on SEK 42.5 billion of clothes it had not yet sold¹. The number landed in the press exactly the way you'd expect: proof that the old fast-fashion giant had been left drowning in unwanted T-shirts while a Chinese upstart called Shein ate its lunch. It was a clean, satisfying story — slow incumbent, glut of dead stock, nimble disruptor. It was also, in the part that mattered most, an artifact of a currency table.

The official story is that Shein stole H&M's demand and left it choking on inventory. The real story is buried in H&M's own filing, in a single parenthetical: that same SEK 42.5 billion pile was, currency-adjusted, down 3% year-over-year¹. The glut grew in Swedish kronor because the krona moved, not because the warehouses filled. The Shein squeeze didn't bury H&M. A weak currency and a Russia exit did most of the damage — and H&M dug itself out methodically enough that, by 2025, it had the opposite problem.

What actually broke in 2022 — and it wasn't Shein

H&M's FY2022 operating margin collapsed from 7.7% to 3.2%¹. That is a genuinely bad year, and the temptation is to pin it on competitive pressure. But read what the company actually charged the year with: SEK 2,591 million in one-time costs for exiting Russia and running a cost-and-efficiency programme¹. Strip those out and the adjusted operating margin was 4.4% — still weak, but a different animal from the 3.2% headline that ran everywhere. The rest of the gap was substantial cost inflation hitting cotton, freight, and energy across the whole industry. None of that is Shein. None of it is even about demand. It is a war, a currency, and a supply chain caught flat-footed by inflation.

The 50% number that everyone repeats and almost nobody reads

The single most-cited piece of evidence for the squeeze is that Shein hit 50% of U.S. fast-fashion sales by late 2022⁵. It's a real figure. It also measures share within a tiny tracked basket of six brands — H&M, Zara, Fashion Nova, ASOS, Forever 21, and Shein — not share of total U.S. apparel spending⁵. Quoted without that denominator, it implies Shein owns half of everything Americans wear. Look at the wider lens and the picture deflates: in global apparel overall, Shein's estimated 2024 share was 1.53%, against H&M's 1.06%⁶. Shein is genuinely ahead. But '1.53% versus 1.06%' is a different competitive reality than 'half the market,' and the gap between those two framings is the entire Shein-squeeze narrative.

The geography makes it messier still. In France in 2022, Shein actually lost 4.5 points of ultra-fast-fashion share even as it gained 11.3 in the UK and 7.5 in Spain⁷. A force that retreats in one market while surging in the next is not a tide washing over H&M everywhere at once. It is a competitor — a serious one — winning unevenly, in pockets, exactly where its low-price, long-tail model fits the local shopper best. That's a problem to manage, not a flood to drown in.

The destocking that proved the glut was a choice, not a fate

If Shein had structurally broken H&M's demand, you could not destock your way out — the clothes would simply keep not selling. Instead, H&M emptied the warehouses on a schedule. By FY2023, stock-in-trade was down 13% currency-adjusted and gross margin had recovered to 51.2%, with after-tax profit up 145%². By FY2025, inventory was SEK 35.4 billion — just 15.5% of rolling sales, against roughly 17-19% at the peak — and gross margin had climbed past 53.4% on an 8.1% operating margin³. You do not engineer that recovery on a demand base that a rival has hollowed out. You engineer it when the original problem was operational: too much stock bought in the wrong currency at the wrong moment, not too few customers.

The honest objection: maybe H&M just retreated to safer ground

Here's the fair counter, and it deserves a straight answer. H&M's U.S. share did fall roughly 10 points between 2020 and 2022 while Shein climbed⁵, and its global apparel share has stagnated even as Shein's expands⁶. A skeptic can argue that H&M didn't solve anything — it just stopped chasing the volume Shein was taking, sold less ambitiously, raised prices and margins, and called the smaller, tidier business a recovery. There's truth in that. Margin expansion can be a victory or a managed retreat, and the line between them is whether the top line follows. H&M's net sales in FY2025 were SEK 228bn³ — below its FY2023 SEK 236bn². Growth has stalled.

But notice what that concession does and doesn't grant. It concedes that Shein is a real, durable competitor squeezing H&M's growth ceiling. It does not rescue the original claim — that the 2022 inventory glut was a Shein-caused crisis. Those are two different arguments, and the popular story conflates them. Shein is pressing on H&M's future; the krona and Russia made a mess of one past quarter. Treating the second as evidence of the first is how a translation artifact became a parable about disruption.

H&M spent three years quietly proving the glut was a choice it could unmake. It cut inventory to below where it stood before the 'crisis,' lifted gross margin to its best level in years, and arrived in 2026 with the opposite worry — empty enough shelves that the CEO is now apologizing for missing demand⁴. The Shein squeeze is real, but it lives in the future, in stalled growth and a long price war H&M may yet lose. The 2022 glut was something far more ordinary: a company that misjudged its supply chain, got caught by a war and a currency, and then did the unglamorous work of fixing it. The disruption story sells better. The filing is just truer.