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Inditex announces financial results

zara

Inditex Group, owner of Zara, announced that its sales continued to recover during the first half of 2020 (between 1st February and 31st July) to reach US$9.4 billion: the decline for the half was -37%, helped by an improved second quarter (from 1st May to 31st July) when the fall in sales slowed to -31%, from a decline of -44% in the first quarter.

SEE ALSO : Inditex to accelerate its digital and sustainable transformation

As many as 87% of the group’s stores were closed during the month of May, with business gradually returning to normal since. Inditex has currently managed to open 98% of its stores around the world, albeit with limits on capacity and restricted opening hours in specific markets.

Online sales grew sharply. Total sales were boosted by very strong online growth, which reached 74% year on year in the first six months of the fiscal year.

Gross margin remained very robust at 56.2% of sales, compared to 56.8% in 1H19, thanks to the management of a business model able to adapt to demand. This management is also evident in inventory levels, which were down 19% compared with close of 1H19. Active cost control helped reduce operating expenses by 21%.

Net cash generation of US$864.8 million. The strong performance sustained in the second quarter was also evident in the evolution in EBITDA and the net cash position. Inditex generated over US$1.1 billion of EBITDA and increased its net cash position by US$864 million during the second quarter. EBITDA for the first half of the year hit US$1.7 billion and net financial position at the end of the first half amounted to US$7.6 billion, despite the adverse impact from the Covid-19 pandemic.

Back to profitability in the 2Q. The above factors combined to drive a return to net profit in the second quarter to $2151.9 million leaving behind the 1Q net loss.

First half net loss was US$229.6 million. Stripping out the US$362.6 million provision recognised in the first quarter to accelerate the integration of the store and online platforms, the group would have recorded a net profit of US$45.9 million in the first half.

In light of these results, Inditex’s Executive Chairman, Pablo Isla, underlined the relevance of the achievements under the current circumstances and stressed that “the recovery and strong performance are due to the hard work, engagement and creativity of everyone in Inditex. I am particularly pleased with our online sales growth, which demonstrates the critical importance of our integrated store and online platform strategy. This is a cornerstone of our unique business model with three key pillars flexibility, digital integration and sustainability. Day by day this combination is proving its solidness.”

The strengthening of the integrated shopping experience and of the online sales capacity, helped online receive 1 million orders in one day for the first time during the second quarter. Over the first seven months (February to August) Inditex’s brands received close to 3 billion online visits and their social networks reached a record of 190 million followers.

In order to meet this sharp growth in demand while offering the highest standards of service, the ongoing development of a proprietary IT platform, Inditex Open Platform (IOP), is crucial. In this same line, the implementation of the integrated stock management system (SINT), thanks to which customers can access the group’s entire stock at all time, is also key.

With regard to this, several stores have already implemented the ‘Store Mode’, a tool that reflects how useful the implementation of the storeonline integration is for customer service.

Against this backdrop, Inditex opened large-format stores in 14 markets during 1H, and refurbished 72 stores, 35 of which were store expansions. This is in line with the company’s strategic commitment to larger units, whereby it continues to absorb smaller stores which do not lend themselves as effectively to the fully integrated store model.

Some of the most prominent store openings and expansions in the first half took place in world-leading shopping destinations such as Moscow, Paris, Madrid, Berlin, New Delhi, Lisbon and Amsterdam. By end of 1H, the group had 7,337 stores in 96 markets. During the second half of the year Inditex will open highprofile stores in Monaco, Beijing, Paris, London and Doha, among other places.

SEE ALSO : H&M announces financial results

Zara’s online platform reached Argentina, Uruguay, Paraguay, Peru and Algeria for the first time in the second quarter. The group’s eight brands’ fashions are available in over 200 markets. Also in 3Q, Zara added online sales to now-integrated local platforms in Chile, North Macedonia, Montenegro, Tunisia and Andorra, and also new platforms in Nicaragua, Honduras, Costa Rica and Guatemala is launched on 16th September. Stradivarius opened its integrated online platform in Saudi Arabia and Israel.

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