Inditex Sales Climb 13% in First Quarter With ‘Strong Growth Opportunity’ Ahead
LONDON — Zara parent Inditex beat market expectations to deliver a strong set of results in the first fiscal quarter of 2023.
Sales rose 13 percent to 7.6 billion euros, while at constant currency they were up 15 percent across all geographic areas and retail concepts. At the end of the first quarter the Spanish retail giant operated 5,801 stores in 213 markets.
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Net income rose 54 percent to 1.2 billion euros in the three months to April 30 while EBITDA, or earnings before interest, taxes, depreciation and amortization, was up 14 percent to 2.2 billion euros.
The sales momentum is snowballing. Between May 1 and June 4, Inditex said sales rose by 16 percent.
Inditex shares closed up 5.7 percent at 33.63 euros on Wednesday.
Royal Bank of Canada described the quarterly results as “outstanding,” and raised its 2024 and 2025 pre-tax profit forecasts by 8 percent.
“We now expect Inditex to achieve at least 10 percent reported sales growth this year and more than 20 percent net income growth,” the bank said.
It noted that Inditex has “more than sustained” its sales momentum in the second quarter. “We think this is a testament to the strength of the product and consumer offer and fits in with the ‘stronger getting stronger’ [narrative], with a handful of winners that we are seeing in the sector. We now see potential for Inditex to achieve double-digit top-line growth for this year,” the bank said.
Despite its scale, Inditex said there is ample room for growth in 2023, and beyond. The company said that, worldwide, it operates with “low share in a highly fragmented sector, and we see strong growth opportunities.”
It added that supply chain operations have returned to normal and inventory levels at the end of the first quarter were 5 percent higher than during the corresponding period last year.
The company said it expects increased sales productivity in its stores going forward, while growth of gross space in 2023 will be around 3 percent. It also expects a negative 2.5 percent currency impact on sales in the full year.
Ordinary capital expenditure will be around 1.6 billion euros in the full fiscal year with the continued rollout of the new Zara store design, which offers self-checkout areas, click and collect points, in-store silos and stockrooms.
Some of the new Zara stores, such as the one in London’s Battersea Power Station, resemble high-end boutiques with separate departments (and changing rooms) for lingerie, footwear, childrenswear and home.
The company added that hardware to implement its new security technology and eliminate hard tags will be available in all Zara stores globally by July with the aim to start test operations in the fall 2023 season.
During a call with analysts, chief executive officer Oscar Garcia Maceiras said that as Inditex opens and refurbishes stores worldwide the focus will be on the “quality of sales” rather than the quantity, and that the company as a whole was working toward becoming more efficient.
“Our business model is currently operating at full pace, and the crucial factor in all of this is our people,” he said.
The company has also been raising its clothing and accessories game, offering fashion-forward product and lush shoots for high-end capsules such as Zara Woman Studio and Massimo Dutti’s “The Cairo Diary.”
In April, Zara partnered with Circ for a first-of-its-kind women’s capsule collection made using recycled polyester and lyocell derived from the separation of polycotton textile waste.
Last year, Inditex made an investment in Circ, a fashion technology company that recycles textile waste back into new fibers, aimed at accelerating industrial-scale solutions towards circularity in the fashion sector.
The Zara Pre-Owned platform, currently available in the U.K., will roll out to France, Germany and Spain in the second half of 2023. “Through this platform, we will continue helping our customers to extend the life cycle of their Zara garments through donation, repair or resale,” the company said.
For fiscal 2022, the company is proposing a dividend of 1.20 euros per share, 29 percent higher than the previous year.
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