May Sales at Inditex Climbed Above Pre-pandemic Levels
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PARIS — As the retail scene moves toward pre-pandemic trading conditions, Zara owner Inditex reported a 50 percent jump in sales over the first quarter compared to lockdown periods the year before.
“Our differentiation and strategic transformation toward a fully integrated, digital and sustainable model continues to bear fruit,” Inditex executive chairman Pablo Isla said in a statement.
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In a conference call with analysts, the executive flagged improvement in activity.
“Inditex results show a progressive recovery in operations,” he said, noting temporary store closures due to pandemic lockdowns had affected business in key markets like the U.K., Germany, Italy and Brazil.
The Spanish fast-fashion retailer, which also owns labels Massimo Dutti, Bershka and Stradivarius, said sales for the three months ending April 30 came to 4.94 billion euros, an 11.5 percent decline compared to its performance in 2019, before the coronavirus crisis struck. Over the quarter, 16 percent of stores were closed.
In a sign that business continued to improve in recent weeks, the retailer also reported that sales in local currencies rose 5 percent in the May 1 to June 6 period, compared to 2019 figures, a 102 percent increase compared to last year.
Those figures show a “strong progressive recovery,” noted analysts at Berenberg in a research note. The analysts said first-quarter sales overall were in line with expectations, while earnings numbers were better than expected.
“There is an encouraging recovery,” noted Berenberg, citing progressive store openings.
Earnings before interest, tax, depreciation and amortization came to 1.24 billion euros, a 155 percent increase compared to the same period last year. Net income stood at 420 million euros. The gross margin figure, 59.9 percent, beat expectations, analysts noted.
“A solid start” to the second quarter, commented analysts at RBC, who were a bit disappointed by the first-quarter tallies.
Inditex has been drawing on digital means to navigate choppy trading conditions, and executives have touted its integrated stock management system that has been rolled out in thousands of stores around the world as playing a key role in allowing business to continue when stores were shut due to the pandemic.
Online sales rose 67 percent, a fast clip that could slow as consumers return to stores and comparable figures become tougher, noted analysts at RBC.
The company has been investing heavily into bulking up its digital means. Over the first quarter, the retailer inaugurated its new zara.com building at company headquarters in northern Spain, a 110 million euro investment that includes audiovisual production studios.
Inditex has also been working to spruce up its store network, shutting smaller outlets while focusing on more spacious, high-tech stores.
The company is pushing into new territory and launched Zara beauty products in May with refillable packaging.
Inditex officials highlighted efforts to improve the environmental impact of its stores, with a focus on energy efficiency and renewable power use, including solar panels, and the collection and use of rainwater at its headquarters.
Cautioning against drawing too many conclusions from the quarter, executives suggested waiting to see how the rest of the year plays out.
“I think it’s better when we see the full year, we will have a much better picture and a much more normalized situation,” Isla said.
The executive touted Inditex’s focus on full priced sales and low inventories, noting that centralized inventory operations and integrating online and in-store stocks has been key to the strategy. There were “zero promotions” during the months of March, April and May, he said.
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