Inditex Profit Jumps As Zara Owner Raises Prices

Zara owner Inditex posted a 24 percent rise in net profit for the first nine months of the financial year, as price increases helped offset weakened global demand for clothing.

The world’s largest fashion retailer’s store and online sales rose 19 percent from a year ago, somewhat faster than analysts had expected. Price increases of 5 percent or more across some areas since the spring helped drive the sales, analysts said.

The company, whose brands also include Massimo Dutti and Bershka, said net profit rose to €3.1 billion ($3.3 billion) from €2.5 billion a year ago in the first nine months of the year.

Net profit for the quarter was up 6 percent to €1.3 billion, in line with market forecasts according to IBES data from Refinitiv.

Shares in Inditex were up 2.8 percent at 12:30 GMT.

The company has outperformed some rivals since Marta Ortega, the daughter of founder-owner Amancio Ortega, took the helm as a non-executive director in April.

“The sales yield may reflect the quality of the product design and offering, as well as the more attractive price point compared to peers as price increases appear to be smaller than the broader market,” Deutsche Bank analyst Adam Cochrane said.

Inditex has recently offered more “high fashion” Zara pieces designed for special occasions. The approach has allowed it to sell more expensive items and attract shoppers from the luxury segment of the market, according to analysts.

Speaking to analysts on a conference call, Inditex CEO Garcia Maceiras cited a strong performance in the United States and said the company was confident about its prospects in China in the medium to long term.

Sales increased by 11 percent during the third quarter, a slower pace than previous months, reflecting a weakened consumer environment. The company’s turnover in the second quarter had increased by 16 per cent from the same period a year ago.

The fashion giant said sales between early November and December 8 were up 12 percent from a year ago. Sales were positive in all geographies, it added.

H&M, which has struggled to compete with its bigger rival Zara, will report results on Thursday.

Analysts expect Inditex to deal with more cost increases in the coming months, including pressure from workers for higher wages.

Around 1,000 store staff working at Zara and its other fashion brands went on strike on Black Friday in La Coruna, the company’s hometown in northern Spain, to demand better pay, while others protested in Madrid the day before.

These workers plan to strike again the day before Christmas and in early January after rejecting the wage increase offered by Inditex until 2024. Two major local unions agreed on the new wage proposal.

H&M this month became the first major European retailer to start laying off staff in response to rising inflation and skyrocketing costs linked to the war in Ukraine.

Inditex said temporarily accelerated inventory inflows to avoid supply chain problems are 15 percent higher than a year ago.

It expects online purchases to account for 30 percent of total sales by 2024.

The company will also expand a platform to repair, resell and donate Zara clothing launched in Britain in November to other core markets next year, Maceiras said.

By Corina Pons; Editors: Inti Landauro and Matt Scuffham

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