Inditex upbeat as sales and margins continue relentless rise
today Dec 11, 2019
On Wednesday, Inditex’s results for the first nine months of the year showed that the Spanish retail giant continues to shrug off the retail malaise, as far as sales are concerned, with a 7.5% increase in the period to the end of October. And it’s clear that growth isn’t only about the firm’s ambitious store opening programme. Management didn’t give a like-for-like sale rise figure for the period, but did say that it estimates like-for-like sales growth of 4%-6% in 2019 as a whole.
Its sales reached €19.8bn in the first nine months and it reported an 8% rise in gross profit for a gross margin of 58.2%, as well as its highest-ever net cash position (up 17%) and a 12% leap in net profit to €2.72bn. That said, the net profit figure includes the impact of the new lease accounting standard, IFRS 16, without which growth would have been ‘only’ 9%. Similarly, EBITDA, which rose 45% to €5.7bn, would have increased by just 10%.
But none of those caveats detract from the strength of the performance. Executive chairman Pablo Isla hailed the company’s strategy that he said again demonstrates the “solid growth being delivered by our integrated stores and online model, thanks to our focus on the highest-quality locations, store environments, products and customer experience both in stores and online. Crucially, this is coupled with strategic investments in technology and sustainability”.
And based on those figures, we can’t argue with his view. The company is continuing to roll out new stores, to accelerate its digital expansion and to tie them both neatly together to make sure it’s reaching the customer where the customer wants to be reached.
That was clear from Q3 with the firm having launched Zara online in South Africa, Ukraine, the Philippines and Colombia, while Massimo Dutti’s and Zara Home’s online platforms went live in the UAE, Saudi Arabia, Lebanon and Morocco. Stradivarius, Oysho and Uterqüe also launched their online platforms in the US. And all group brands are now operating worldwide online stores since the launch of bershka.com/ww. These reach more than 200 markets across the globe.
And on the physical stores front, importantly, the company opened its first for&from location outside Spain, in Como, Italy. The chain has an ethical focus and gives jobs to disabled workers.
During the period, the company continued its retail opening/makeover programme and its eco drive too with all new and revamped locations contributing strongly to its sustainability goals.
Its store strategy is to focus on larger and more integrated stores in top locations on the main shopping streets of key cities in 96 markets. Q3 saw some high-profile reopenings, such as the Zara Preciados in Madrid and Zara Dubai Mall, the largest single-storey store in the world, with a floor space of over 5,000 sq m.
In fact, all the brands (Zara, Pull&Bear, Massimo Dutti, Bershka, Stradivarius, Oysho, Zara Home and Uterqüe) opened or reopened stores in premium locations during the quarter. In China, Zara reopened its expanded store in the IFC Mall in Hong Kong and multiple brands opened new spaces on Jinan Mix City in Jinan. The brands also entered shopping malls such as Salaris, in Moscow, and City Centre Almaza, in Cairo.
Also during the quarter, investment activity continued at the new building that will be used by zara.com. It’s a 63,000 sq m space within the Arteixo headquarters that will house the infrastructure needed for the online platform’s photography and video productions. “The new building is being equipped with the latest eco-efficiency developments in terms of both the building methods being applied and subsequent waste and energy management,” we’re told.
Work is also continuing at the logistics connection hub in Lelystad in the Netherlands, which is due to be operational next year and is already supporting the distribution of new arrivals towards the end of the AW19 season and the upcoming SS20 collections.
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