Inditex beats H1 expectations as its Midas touch continues, AW23 starts well

Inditex’s first-half results on Wednesday saw the Zara, Massimo Dutta and Bershka owner reporting a 40.1% surge in profits, even though it had slowed down price rises linked to higher costs in the face of the global cost-of-living crisis.

Those price controls helped sales rise in the six months to July to €16.9 billion, up 13.5%, with the gross margin that was over 58.2% rising 27 bps year on year. Constant currency sales grew 16.6%.

It meant gross profit increased 14.1% to €9.8 billion, EBITDA increased 15.7% to €4.7 billion, and EBIT rose 30.2% to €3.2 billion. Pre-tax profit was up 39% to €3.3 billion and net profit jumped, as mentioned, hitting €2.5 billion, which was even better than analysts expected.

This was yet further evidence of how the company seems to have the Midas touch and rarely puts a foot wrong.

The company called it a “very robust operating performance due to the creativity of the teams and the strong execution of the fully integrated business model”.

CEO Óscar García Maceiras said the firm’s SS23 collections “have been very well received by our customers” and sales showed “very satisfactory development both in stores and online” as well as in all geographical areas and in all concepts.

Importantly too, the company added that its AW23 collections have  also been very well received by shoppers. That has meant store and online sales in constant currency between 1 August and 11 September are up 14% year on year. That’s a slight slowdown compared to H1 but it’s strong nonetheless.

During the first half, the company opened stores in 20 markets and at the end of the period it operated 5,745 locations. 

SALES BY BRAND

The company said that its star Zara brand (including Zara Home) saw sales rising by 13.1% during the half to reach €12.362 billion. Meanwhile Pull&Bear was up 11.4% with its sales topping a billion euros at €1.042 billion. Massimo Dutti rose a healthy 16.8% to €842 million, Bershka was up 12.3% to €1.184 billion, Stradivarius also rose above a billion with a 17.7% increase to €1.075 billion, and Oysho jumped 18.3% to €346 million.

The company added that it “continues to see strong growth opportunities” and its “key priorities are to continually improve the fashion proposition, to enhance the customer experience, to increase our focus on sustainability and to preserve the talent and commitment of our people. Prioritising these areas will drive long-term growth”. 

To take its business model “to the next level and extend our differentiation further”, it’s also “developing several initiatives in all key areas for the coming years”.

That includes boosting in-season proximity sourcing to allow a swift reaction to customer demand, and focusing on increased productivity from its stores.

It currently operates in “213 markets with low share in a highly fragmented sector and we see strong growth opportunities. Optimisation of stores is ongoing” and it expects “increased sales productivity in our stores going forward”. It’s continuing to open new and revamped stores with the addition of around 3% extra space for the year as a whole.

The new store design for Zara created by its Architectural Studio is a key focus, as is the enlargement process for important stores, as well as relocations.

And the US is a major target with the firm aiming to grow its market share there. It has a plan to open 10 new stores and revamp/enlarge another 13 in a market that’s already its second-largest individual country market after Spain.