Inditex still looks strong, despite Q3 sales growth slowing

Fashion retail giant Inditex has reported another good sales period and also on Wednesday it said that the final quarter of the year is going well.

Inditex

Its AW23 collections have been “very well received” by its customers and store and online sales in constant currency between 1 November and 11 December 2023 were up as much as 14% year on year.

That bodes well for profits in the full year, but for now let’s look at what happened in the latest quarter and the first nine months of its financial year.

The company said it “continued with a very robust operating performance due to the creativity of the teams and the strong execution of the fully integrated business model”.

Those well-received collections meant sales grew 11.1% to reach €25.6 billion in the nine months to October 31 — or 14.9% in constant currency — “showing very satisfactory development both in stores and online”. Sales were positive in all geographical areas and in all concepts. 

Sales at the end of the first half were at €16.9 billion, which means they added up to €8.7 billion in Q3 specifically.

That was a rise of only 6.6% in the quarter, which was below analyst expectations and also well below the double-digit figures of the past couple of years.

But in light of a well-publicised cost-of-living crisis globally, the problem of warn weather delaying autumn fashion purchases, and also the skewed growth in recent years due to the earlier pandemic shutdown, 6.6% isn’t a figure to be sniffed at. It also looks good against a number of the company’s smaller retail peers that have been underperforming in recent months.

Investors didn’t seem to mind the more tepid sales rise either as its shares rose in early trading.

Gross profit for the full nine-month period increased 12.3% to €15.2 billion and the gross margin reached 59.4%, up 67 bps on the year (with more growth in this margin expected for the full year).

EBITDA rose 13.9% to €7.4 billion and EBIT rose 24.3% to €5.2 billion, with pre-tax profit up 29.8% to €5.2 billion and net income up 32.5% to €4.1 billion.

The company called the performance “very robust” and attributed it to the creativity of its teams as well as the strong execution of its fully integrated business model.

It’s also been helped by the addition of new stores and it has launched new locations in 36 markets during the period, bringing it to a total of 5,722 stores at the end of the nine months.

Also positive was that the autumn season saw a normalisation of supply chain conditions as well as a more favourable exchange rate between the euro and the US dollar compared to a year ago.

Growth potential

While the huge size of the business means that at times it might look as if growth potential is limited, the company also said on Wednesday that it “continues to see strong growth opportunities”. It added that “to take our business model to the next level and extend our differentiation further”, it’s developing several initiatives in all key areas for the coming years.

It said that Inditex operates in 213 markets “with low share in a highly fragmented sector and we see strong growth opportunities”, expecting “increased sales productivity in our stores going forward. The growth of gross space in 2023 will be around 3% [and] optimisation of stores is ongoing”.

It’s also “focusing on the creativity, innovation, design and quality of all our collections and integrated sales channels, while reinforcing the commercial initiatives of all our concepts”.

And it’s developing several initiatives to make its stores more appealing and to ensure they’re in the right locations. For instance, the new store design for Zara created by its Architectural Studio is being applied to openings, enlargements and relocations such as Dubai Mall of the Emirates, Rotterdam Coolsingel, Miami Dadeland and Sevilla Plaza del Duque.

The company continues to open in key locations such as Massimo Dutti’s London Battersea store, Bershka Milan Corso Vittorio Emanuele and is rolling out into new markets, like the first Stradivarius stores in Germany at Stuttgart and Dresden.

Also boosting customer experience, it has recently launched a new weekly livestream experience on Douyin in China. The livestream runs for five hours and includes catwalks, walkthroughs of the fitting rooms and make-up area, and ‘behind-the-scenes’ views of the camera equipment and staff. “The livestream reflects our continual efforts to offer the best customer experience and will be available soon in other markets,” we’re told.

Meanwhile, on sustainability, the deployment of its Zara Pre-owned platform goes on. In fact, only on 12 December the platform was launched in 14 European markets: Spain, Portugal, Germany, Austria, Belgium, Luxembourg, The Netherlands, Finland, Ireland, Italy, Greece, Croatia, Slovenia and Slovakia, joining the service offered already in the UK and France.

Copyright © 2023 FashionNetwork.com All rights reserved.

FOLLOW US ON GOOGLE NEWS

Read original article here

Denial of responsibility! Todays Chronic is an automatic aggregator of the all world’s media. In each content, the hyperlink to the primary source is specified. All trademarks belong to their rightful owners, all materials to their authors. If you are the owner of the content and do not want us to publish your materials, please contact us by email – todayschronic.com. The content will be deleted within 24 hours.

Leave a Comment