- The Spanish clothing giant’s net sales rose by 7.5% to €38.6bn last year
Inditex has reported a sluggish start to the financial year despite saying its spring and summer collections were ‘well received’ by customers.
The Zara and Massimo Dutti owner saw its turnover increase by 4 per cent between the start of February and 10 March, compared to 11 per cent growth during the same period last year.
It follows sales slowing at the beginning of the festive shopping season amidst a more challenging consumer backdrop across Europe.
Mamta Valechha, consumer discretionary analyst at Quilter Cheviot, suggested the recent moderation may have been caused by unfavourable weather conditions and ‘weak consumer sentiment’ in the UK, US and Germany.
Inditex shares tumbled 8.1 per cent by late Wednesday afternoon, although they have still doubled over the past three years thanks to soaring revenues and profits.
The Spanish fashion giant revealed its net sales rose by 7.5 per cent to €38.6billion in the year ending January, primarily driven by a jump in orders of Zara products, which are responsible for more than two-thirds of its turnover.
Challenging: Zara owner Inditex has reported a sluggish start to its first quarter
Store purchases expanded by 5.9 per cent, which the firm said reflected ‘incremental footfall and increasing productivity,’ while online revenues climbed by 12 per cent to €10.2billion.
It noted the higher shop sales were achieved with 2 per cent extra commercial space and 2.3 per cent fewer outlets than the previous year.
Combined with gross margins stabilising at 57.8 per cent, Inditex’s pre-tax profits went up by 10.3 per cent to €7.6 billion.
Following the result, the Galicia-based company has proposed hiking its dividend by 9 per cent to €1.68 per share.
Oscar García Maceiras, its chief executive, remarked: ‘The excellent sales and profit figures show the solidity of the Inditex group’s profitable growth.’
Inditex plans to invest around €1.8billion in capital spending this year on technology, store refurbishments, and improving its online platforms.
It also intends to spend a further €900million enlarging its logistics capacity, including opening a second distribution centre in Zaragoza this summer.
Upon announcing the new site last year, the business said it would be approximately 3.1 million square feet in size and create 1,500 jobs when operating at full capacity.
Russ Mould, investment director at AJ Bell, said: ‘Whereas some companies would hide under a rock when times get tough, Inditex is ploughing ahead with investing its technology, logistics capabilities and doing up physical stores.
‘It is also continuing to open new shops. That’s a sign that Inditex has its eye on the longer-term prize and can use its financial strength to get one up on the competition.’
Inditex had 5,560 outlets at the end of January, 129 fewer than 12 months earlier. The firm launched its first stores in Uzbekistan and plans to enter the Iraqi market later this year.
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