MADRID (AFP) – Zara owner Inditex reported a record net profit in the first half of 2023 yesterday due to strong sales as the world’s biggest fashion retailer benefitted from hiking prices.
The Spanish group posted a net profit of EUR2.51 billion in the first six months to July 31, beating its previous record of EUR1.79 billion in the same period a year earlier.
This result was higher than the EUR2.42 billion predicted by analysts from financial analysts at FactSet.
Inditex attributed this momentum to the strong growth in sales, which reached 16.85 billion euros, 13.5 per cent higher than in the same period a year earlier, demonstrating “very satisfactory development both in stores and online”.
Its pre-tax earnings (EBITDA) rose by 15.7 per cent to 4.66 billion euros, a company statement said.
In a complicated global context, the record first-half figures reflected the “determined progress” made by the retailer, Inditex chief executive Oscar Garcia Maceiras said in the statement.
Inditex, which owns seven brands including upmarket Massimo Dutti and teen label Stradivarius, has been hit by the war in Ukraine that forced it to close its 514 shops in Russia, at the time its second-biggest market after Spain.
The group has also seen its production costs rise due to global increase in transport and energy costs, which it decided to offset with price hikes, setting itself apart from rivals like H&M.
A UNIQUE RETAIL MODEL
In recent months, it chalked up record sales, notably in Europe and the United States, notably seeing a 14 per cent rise between August 1 and September 11, driven by the launch of its autumn/winter collections.
Given the strong results, the group reaffirmed its objectives for 2023, saying it saw “great growth potential going forward”, highlighting developments like its second-hand clothes platform called “Pre-Owned” which was recently launched in several countries as a way of reducing its carbon footprint.
The Spanish group underwent a leadership shake-up last year with Marta Ortega, daughter of multi-billionaire founder Amancio Ortega, taking over as chairwoman.
The record results however were cooly received by the markets, with Inditex shares trading nearly 4.0 per cent lower on Spain’s Ibex 35 just before midday (1000 GMT) over questions about the group’s ability to maintain such a pace of growth.
“Although the company continues to demonstrate much more stable growth than the rest of the sector.. the question remains as to whether it can maintain its leading position.. and its global scalability quickly and efficiently,” wrote Javier Molina, an analyst with trading platform eToro.
The group has enjoyed a buoyant performance on the stock market in recent months with its share price rising by 44 per cent since the start of the year and by 64 per cent over the last year.
“The group’s domination of the apparel retail market is more visible than ever,” Bank of America analysts wrote in a note last week, indicating the retailer had entered “a virtuous cycle fuelling significant market share gain at industry leading margins”.
The result was “a unique model, whose aim is to identify early successful trends, and capitalise on them in a matter of weeks” as well as its prominent commercial profile, they said.