Sales surge at Zara owner Inditex
By Abigail Townsend
Date: Wednesday 16 Mar 2022
(Sharecast News) - Inditex reported a surge in annual sales on Wednesday as the world's biggest fashion retailer continued to recover from the pandemic and boost its digital offering.
The owner of Zara said sales reached €27.7bn in the year to 31 January, a 37% hike on the previous year and up 3% on 2019. Online sales rose 14% to €7.5bn, accounting for 25.5% of total sales. The retailer expects online sales to account for 30% of revenues by 2024.
Earnings before interest, tax, depreciation and amortisation were €7.2bn, up 58%, while net income surged 193% to €3.2bn.
In the first quarter, 24% of trading hours were unavailable because of Covid-19 restrictions. However, the trading environment normalised in the second and third quarters, which helped sales, pre-tax profits and net income all reach record highs.
"Inditex continues to expand its global, fully integrated platform underpinned by the key strategic pillars of store and online integration, digitalisation and sustainability," the retailer said. "In 2021, Inditex had a strong operating performance. The year was defined by a progressive normalisation of sales and our strong differentiation."
Looking to the current year, and store and online sales rose 33% year-on-year in constant currency from 1 February to 13 March, or by 21% when compared to the same period in 2019.
The retailer's stores are currently closed in Russia and Ukraine, however. Sales in both regions represented approximately 5 percentage points of sales growth during the current period.
Laura Hoy, equity analyst at Hargreaves Lansdown, said: "The crisis in Ukraine meant Inditex has halted trading in the region, with its Russian stores closed for the foreseeable future...which will be a drag on the results moving forward.
"While this will slow progress somewhat, the group should be able to take this knock to sales in its stride, as growth in markets together with improved profitability will paper over the hole for now.
"Ultimately, Inditex is doing everything right at the moment, but there's a lot outside its control. We're most concerned about inflationary pressure and its impact on consumers. With four or more rate hikes expected from the Federal Reserve in 2022, we worry that US consumers could start to slide down the value chain to cheaper alternatives. This is a key growth area for Inditex, with the US now the group's second largest market after Spain."
Inditex, which also owns Pull&Bear, Massimo Dutti and Bershka, had 6,477 stores across 40 markets at the end of the 2021 full year. Shares in the group were flat as at 1130 GMT.
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