Inditex SA sales jumped at the start of the third quarter as the Zara owner’s popular fashion ranges and nimble operations helped it cope better with the poor weather and choppy consumer demand dogging rivals.
Shares rose after the world’s biggest publicly traded clothes retailer reported an 11 percent growth in sales, excluding foreign-exchange movements, for the five weeks to Sept. 8. This was higher than growth in the second quarter, the company said in a statement on Wednesday.
Unseasonable weather across various parts of Europe in early June kept shoppers away from retailers, leaving many with unsold stock piles. Inditex rival Hennes & Mauritz SE cited that as a reason for its poorer sales performance. Eurostat data across the eurozone showed general retail sales fell 0.3 percent in July after months of growth.
Inditex — which also owns the brands Massimo Dutti and Pull & Bear — has avoided the pitfalls of rivals as its tightly managed supply chain has allowed it to quickly get fresh products in and out of stores, making it more agile on both fashion trends and potential headwinds. Europe was the company’s strongest region in the latest period with solid growth, particularly in its home market of Spain. Sales were softer in Asia and the US — a key expansion market for the retailer.
“This is again a set of solid numbers,” Barclays analysts led by Nicolas Champ said in a note to clients. It’s “back to ‘normal’ after softer growth in June/July,” they said.
Inditex shares rose as much as 5 percent in early trading in Madrid. The company’s shares are up about 41 percent in the past 12 months.
The market is keeping a close eye on performance at Inditex, which recorded stellar double-digit sales gains during the pandemic but has shown somewhat slower growth in the last 12 months. The strong start in the third quarter, which is in line with expectations, is off an easier base of comparison to the same time last year, when the pace of sales slowed.
Chief Executive Officer Oscar Garcia Maceiras, who was appointed in late 2021, has embarked on an ambitious plan to enhance the firm’s footprint across the US, the company’s second largest market by sales.
While the firm has largely relied on e-commerce and a small portfolio of stores in the US until recently, Inditex is set to open 10 new Zara locations and refurbish or enlarge another 13, in line with its strategy for bigger shops that increasingly include distinct sections for other product categories like cosmetics or footwear.
Operating profit in the first half also came in higher than expected, rising 12 percent to €3.6 billion ($4 billion), the Arteixo, Spain-based firm said. Analysts had estimated €3.5 billion.
Inventory fell 1.5 percent at the end of the period, which set the retailer up for a strong start to the second half, according to said Charles Allen, a Bloomberg Intelligence senior analyst.
Still, Inditex warned that currency shifts, predominantly a weaker dollar, will reduce revenue by 3 percent in 2024, more than initially forecast.
Inditex is spending €2.7 billion this year to roll out new technology across the business and expand its logistics capabilities, including creating more capacity for Zara, Bershka and footwear.
By Clara Hernanz Lizarraga
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