Apr 2, 2019
Inditex’s retail lease costs add up to nearly €2.4 billion in 2018
Apr 2, 2019
Spanish fast-fashion giant Inditex spent almost €2.4 billion in rental costs for its stores in 2018, equivalent to almost 10% of its sales, which were worth €26,145 billion in the last financial year.
Specifically, in 2018 Inditex recorded operating lease expenses, which correspond mainly to the rental of retail premises from third parties, of €2.392 billion, equivalent to an increase of 1.4% over the previous year, according to the documentation submitted to Spain’s National Securities Market Commission (CNMV).
As of the end of the 2018-19 financial year, Inditex operated 7,490 stores in 96 markets, after opening new stores in 56 countries worldwide.
Due to the group’s presence in many different countries, to the resulting variety of laws governing rental contracts, and the different nature and economic standing of the property owners, among other factors, there is a wide variety of clauses regulating the functioning of the rental contracts undertaken by Inditex.
In many cases, the lease contracts set out simply a fixed rent, usually paid on a monthly basis, which may be updated based on different rent review rules, such as index-linked updates based on inflation, or periodic updates at going market prices, among others.
In other instances, according to Inditex, the amounts paid to the lessor are calculated as a percentage of the sales generated by the store in the rented premises.
As for the terms of the lease contracts, in this case too there are various cases, although the contracts generally have an initial average duration of between 10 and 15 years. Also, in most cases, the tenant has the faculty of extending the contract beyond the initial rental period.
In the 2018-19 financial year (from February 1 2018 to January 31 2019), Inditex recorded a net profit of €3.444 billion, equivalent to a 2% increase compared to the previous year (+12% at constant exchange rates), while sales were worth €26.145 billion, up 3% over the previous year.
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