Sept 11 (Askume) – Zara owner Inditex (ITX.MC) on Wednesday reported a sharp rise in sales of its autumn and winter collections, sending its shares higher as the world’s biggest listed fashion giant recovered from a summer setback.
Spain’s Inditex shares were up 4.6% by 0855 GMT, outperforming the IBEX35 (.IBEX) which was up 1.1%.
Inditex said sales rose 11% year-on-year at constant exchange rates in the period from August 1 to September 8. In the first half of the year, sales growth slowed to 7.2% from 13.5% in the same period last year, partly due to rain and cold in the domestic market in June.
Zara’s hopes for better second quarter results were dashed due to bad weather in June, and analysts were expecting an improvement in third quarter results.
Swedish company H&M (HMB.ST) said in June it expected sales in local currency this month to be 6% lower than a year earlier, partly due to bad weather in many markets, while Primark (ABF.F) said in September 5 its summer sales were hit by rain in Britain .
Inditex reported a 10% rise in first-half profit to 2.8 billion euros ($3.09 billion) in the year to the end of July on sales of 18.1 billion euros. Analysts polled by LSEG had expected sales of 18 billion euros and profit of 2.77 billion euros.
“We remain confident in our ability to grow this business, primarily due to our unique model,” CEO Oscar Garcia Maceiras said on a conference call with analysts. He added that the company’s strong online sales are largely due to the operational support of its stores.
The retailer is trying to stay ahead of rivals such as H&M and fast-growing Chinese fashion rival Shein by investing in logistics and technology to deliver fashion faster and keep everyday items cheaper.
Marcellus said the new logistics centre in Zaragoza, Spain, is expected to open in May or June 2025, and the retailer will renovate some of its flagship stores in China and Spain, as well as expand its Massimo Dutti brand in the United States and the Bershka brand in India.
Maceiras said Zara will expand its app-based second-hand service to the United States in October, allowing customers to sell, donate or repair items. The goal is to cover all major markets by 2025.
Following its success in China, Zara will engage customers through live shopping live streaming in key markets including Spain, the United States, France, Italy, Germany, the United Kingdom, Ireland, the Netherlands and Canada in the coming months.
The company’s gross profit margin during the period was 58.3%, an increase of 19 percentage points from the same period last year.
“First half gross margins reflect less-than-expected cost growth,” RBC analyst Richard Chamberlain said in a note.
Analysts and investors say Inditex is more insulated than its rivals from supply chain challenges in Asia because about half of its products come from near Spain.
“In the long term, seasonal events such as the weather will not affect Inditex’s business,” said Javier Brun, a portfolio manager at Tree Asset Management in Madrid, which owns Inditex shares. “We are watching its U.S. strategy in the long term. We believe it can go a long way in that market.”
In the United States, its second-largest market, Zara raised prices in the second quarter at a slower pace than ever before and by a smaller margin than H&M, according to retail analytics firm EDITED. Jeans prices have risen 2% this year, while H&M’s prices have risen 8%.
Union Investment Fund Manager Vera Diehl said: “From a three-to-five-year perspective, Inditex is the best fashion retailer in the entire physical industry and the online industry.” Vera believes that the gap between Inditex and H&M and Shein has increased.
(1 USD = 0.9050 EUR)
