Currency translation effect
Also: translation effect, FX translation
The currency translation effect is the difference between reported growth and constant-currency growth: the part of the change that comes from converting foreign subsidiaries' sales and profits into the reporting currency at different rates. It changes the reported figure, not local trading. A strong home currency lowers an international retailer's reported sales even when every market sells the same in local terms.
Country managers report and are judged in local currency, while the group reports in its home currency, so the two can show opposite results in the same quarter. Translation is separate from transaction exposure, the cost of buying stock in one currency and selling it in another.
H&M's net sales fell 6.8% in Swedish krona and 1% in local currencies in the six months to 31 May 2026; currency translation of about SEK 6.5bn is 85.3% of the fall.