Inditex Q1 sales growth slowed but retail giant remains buoyant

Inditex’s ability to wring impressive sales growth out of even the toughest economic backdrop seemed to falter in the three months to April 30 as its Q1 growth slowed.

And the Spanish fashion giant still turned in an inflation-beating Q1 sales rise while Q2 figures also showed a bounce-back, so it’s clearly still a standout performer compared to many of its industry peers.

Q1 revenue rose 7.1%, as expected, to €8.2 billion for the third successive quarter of single-digit growth. And operating income was €1.6 billion, also meeting analysts’ estimates. 

But importantly as mentioned, there was a strong sign that its double-digit growth trajectory is back on track. As well as constant currency Q1 sales actually rising 10.6%, the company said SS24 collections “continue to be very well received by our customers. Store and online sales in constant currency between 1 May and 3 June 2024 increased 12% versus the same period in 2023”.

The company called its Q1 performance “very robust… due to the creativity of the teams and the strong execution of the fully integrated business model”.

The numbers

Gross profit increased 7.3% to €4.9 billion. The gross margin reached 60.6% (up 13 bps year on year) and operating expenses increased 6.4%, pleasingly below sales growth.

As mentioned, operating income — or EBIT — was €1.6 billion, a 10.3% rise and EBITDA increased 8% to €2.4 billion. Pre-tax profit rose 11.1% to €1.7 billion and net income increased 10.8% to €1.3 billion.

The company said it “continues to see strong growth opportunities. To take our business model to the next level and extend our differentiation further we are developing several initiatives in all key areas for the coming years”.

Inditex has continued opening new stores and in the latest quarter flung open the doors of shops in 28 markets. That included its arrival in Uzbekistan at Tashkent City Mall.

On 3 April, it also reopened 19 stores of seven brands and resumed online operations in Ukraine. A total of 48 stores had been reopened in this market.

Its Zara brand has also launched in new locations such us the Zara Piraeus Tower in Athens. And it has revamped and upsized “some of our most emblematic stores” such as Zara Rivoli Paris and Zara Skokie in Chicago. The brands continue to launch in important locations, such as Massimo Dutti in Cannes, Oysho in Stratford London and Zara Home’s pop-up store in Paris Rue du Bac.

Massimo Dutti has now launched on JD.com, in China. Menswear, womenswear and accessories are now available on the platform.

At the end of the period, it operated 5,698 stores globally. 

Future confidence

We’ve already seen how the company’s sales appear to have picked up in Q2 so far and the company said on Wednesday that it continues to see plenty of future potential. 

“Inditex operates in 214 markets with low share in a highly fragmented sector and we see strong growth opportunities,” it explained. 

“The growth of annual gross space in the period 2024-2026 is expected to be around 5%. Inditex expects space contribution to sales to be positive in this period, in conjunction with a strong evolution of online sales. Optimisation of stores is ongoing.”

In view of those future growth opportunities, it’s also implementing a logistics expansion plan in 2024 and 2025. This “extraordinary two-year investment programme focused on the expansion of the business” allocates €900 million a year to increase logistics capacities in each of those financial years.