Inditex increases its prices and inventory levels in 2022
Positive financial results are continuing to accompany the Inditex group in its new era under Marta Ortega's presidency. This was reflected in the group's figures for the first half of the year, published on Wednesday, September 14, with total sales up 24.5% to €14.84 billion. EBITDA increased by 30% to €4.029 billion, while net profit rose by 41% to €1.794 billion. The "good operating performance" of the group's integrated model has resulted in "record-breaking" figures, which came as a surprise against the current geopolitical backdrop marked by uncertainty, between inflation, the war in Ukraine and consequences left behind by the pandemic.
Physical store closures continue
24 markets have been affected by store openings and the group founded by Amancio Ortega has closed the half-year period on July 31 with a total of 6,370 points of sale and 284 net closures compared to the same period in 2021. Since the beginning of the pandemic, the company's network of physical stores has decreased by 14.1% with 1,050 of its stores being closed down.
Uterqüe's 82 stores have all been closed while Pull&Bear is the group's only retail chain to have increased its number of stores compared to the first half of 2021, from 864 to 866 locations. Despite 33 closures, Zara continues to lead the group with 1,964 stores.
Increased inventory in view of supply chain disruptions
For Fall/Winter 2022-23, the group based in Arteixo (A Coruña) has decided to "temporarily" increase its incoming inventory levels, with the aim of "increasing the availability of products in the face of possible tensions in the supply chain". As of July 31, the amount of items in stock was 43% higher than in the first half of 2021, while inventory levels were 33% higher as of September 11.
During the conference with financial analysts, the group recalled that other companies in the sector have also used advance purchasing. The company will also maintain its strategy of local sourcing throughout the season. Thanks to its ability to respond quickly and flexibly, the group prides itself on being able to "react more quickly to fashion trends and occupy a unique place in the market"
"Selective" price increases
As already happened last season, when the group announced price increases of around 2% in Spain and Portugal due to global inflation, Inditex will apply "selective single-digit price increases" in its Fall/Winter collections. According to Marcos López, the company's director of capital markets, the group will maintain its "stable pricing policy". He stressed, however, that in view of "the temporary impacts derived from inflation, it is necessary to adjust prices in certain markets" in order to preserve gross profit margins.
Once again, as occurred in the presentation of annual results last March, the CEO of the Spanish company, Óscar García Maceiras, assured that Inditex's intentions are to maintain its business model of "high quality products at reasonable prices". The increase in prices will be one-off and will vary depending on several factors, such as product categories and retail channels.
Regarding the controversial implementation of return fees for online orders, which Zara initiated in selected markets last fall, the company said it has had "no impact whatsoever" on sales, but has been "extremely well accepted". In addition, the company celebrated the positive effects of the policy, which have included an increase in returns in physical stores as well as a reduction in customers' return period. "From an environmental standpoint, customers have clearly understood that this is a trend that will be implemented industry-wide in the coming years."
The company, which plans to close the year with an investment of €1.1 billion euros in its stores, digital presence and logistics, would like for e-commerce to account for 30% of the group's turnover by 2024. "Our business model is operating at full capacity and has great growth potential for the future," said García Maceiras, concluding that "macroeconomic concerns are understandable, but we are very confident in our long-term growth opportunities."
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