Inditex shines again in first nine months, current trading is strong
today Dec 13, 2017
Retail giant Inditex isn’t immune to fashion’s negative trends, but the company is certainly doing better than many, saying Wednesday that net sales in the first nine months of the year were up 10% and profit was up 6%.
Ok, that 10% sales advance is lower than the 11% achieved a year earlier, and the profits growth is lagging the sales rise, so the firm is clearly sacrificing some earnings to drive its revenue upwards. But in current fashion market conditions where visitor traffic to stores is struggling globally, pureplay e-tailers are gabbing market share, and some key markets are in decline, it’s an undeniably impressive result.
And importantly, its strong sales are continuing with Inditex also saying that in the current period (November 1 to December 11), online and offline sales in local currencies have risen 13%, which means the Holiday shopping season seems to be going well.
So let’s look at the detail of those nine-month results. Net sales rose to €17.96 billion in the period to the end of October and net profit was up to €2.34 billion. Those two figures came a time when it confronted the growth of e-tail and embraced it with significant e-tail expansion. That helped gross profit to rise 9% to €10.32 million, although the gross margin was down slightly at 57.4% from 57.9%. As well as net profit rising 6%, so did earnings on an Ebit and Ebitda basis, hitting €2.99 billion and €3.82 billion, respectively.
As mentioned, the group continued to develop its online offer in the period, rolling out same-day delivery in six cities (Madrid, London, Paris, Istanbul, Taipei and Shanghai) and next-day delivery in six markets, including Spain, France, the UK and China. And it started deploying automated in-store pick-up points for online orders too. Such initiatives really count as its more-than-7,500 stores in 94 markets give it an almost-unequalled click-and-collect advantage over rivals.
The company opened new stores in 52 different markets in the nine-month period and launched for the very first time in Belarus. And it expanded its online presence further via its Zara website debuting in India, Malaysia, Singapore, Thailand and Vietnam, and Bershka in the US, South Korea, Japan. That now gives it an e-presence in 45 markets.
Chairman and CEO, Pablo Isla, highlighted the international expansion as a key factor in its success and it’s hard to argue with that as the firm opened 212 stores under its Zara store, Massimo Dutti, Pull&Bear, Bershka, Stradivarius, Zara Home and Oysho banners, some of them major flagships.
Of course Zara remained its star chain and the opening programme there was the most intensive, including a 6,000 sq m store at Castellana 79 in Madrid, plus the first street store in Mumbai, which covers 4,800 sq m in the Ismail Building. And since the period-end, it has unveiled the new 2,200sq m Zara Cloud Nine store in Shanghai and a 4,500 sq m space in Hanoi, so there appears to be no slowdown in its opening strategy.
Other chains also debuted in new markets with Zara Home launching in Armenia and the Czech Republic, Oysho debuting in Honduras, and Massimo Dutti, Pull&Bear and Stradivarius all setting foot in Vietnam for the first time.
But as well as openings retail locations, the company also made sure its brands were prominent in consumers’ minds with a raft of initiatives designed to target consumers directly. They included Zara working with photographer Steven Meisel on the images for its AW17 women’s collection and expanding the scope of its Join Life collections, launching men’s and baby ranges.
Meanwhile, Massimo Dutti participated in the TMall platform’s Super Brand Day, creating a lookbook featuring celebrity Bosco Wong, and organising a catwalk fashion show. And Pull&Bear celebrated Marc Márquez’s victory in the MotoGP world championships by launching the second Marc Márquez X Pull&Bear collection. The brand also launched its first complete line of women’s beauty products under the Hey Beauty! brand.
Its Oysho label took advantage of the fitness trend and launched a Yoga Tour, organising events in Madrid and Istanbul in October and more than 3,000 people participated in the yoga masterclass given on Madrid’s Paseo del Prado. And the brand launched its first ski collection, with premium finishes and performance fabrics.
It all adds up to a company that may be massive but is showing no signs of being ready to slow down just yet.
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