Inditex SA’s sales growth eased over the summer, disappointing investors who’ve grown accustomed to outperformance by the owner of the Zara fashion chain.
(Bloomberg) — Inditex SA’s sales growth eased over the summer, disappointing investors who’ve grown accustomed to outperformance by the owner of the Zara fashion chain.
The shares fell as much as 4.3% in Madrid after Inditex reported a 14% sales gain for the first weeks of the third quarter, excluding foreign-exchange movements. That was below the 17% gain for the first half.
“The trading update was weaker than anticipated,” wrote Bestinver Securities analyst Patricia Cifuentes. The retailer also warned that currency shifts will reduce revenue.
Though Inditex still delivered earnings ahead of analysts’ estimates, the Spanish company has set a high bar for itself. Its business model of speeding designs from factories into shops in days has given it an edge over rivals courting fashion- and budget-conscious shoppers, and Zara’s online sales have provided a further boost since the pandemic.
After other European fashion brands reported mostly strong results, with Hugo Boss AG and Next Plc raising their forecasts, investors were expecting more. Inditex’s shares had risen more than 40% this year.
Store Count
Barclays analyst Nicolas Champ has raised concerns over growth plans in the US, where retailers have warned that consumer sentiment is weakening. The US is Inditex’s second-largest market by sales, largely through e-commerce.
Chief Executive Officer Oscar García Maceiras has stepped up plans to expand the company’s US physical presence, opening 10 new stores and refurbishing or enlarging another 13.
Elsewhere, with shoppers visiting malls less frequently, Inditex has been reducing its store count to focus on bigger locations that generate more sales. New additions include Paris’s Hotel de Ville and Rotterdam’s Coolsingel. Last year, Zara opened its largest boutique ever in Madrid.
Inditex is also coming up with more online deals, such as a $89.90 leather trenchcoat that can only be purchased on the Pull&Bear website and not in stores. Zara has also been offering an $89.90 Barbie-themed pink gingham dress.
Bloomberg News reported Tuesday that the company had hit snags with a new security system.
Read More: Zara Finds Shoplifters Outsmarted Its New Security System
The retailer said Wednesday it installed equipment for the system across the Zara chain globally by July. An executive said on a call with analysts that the implementation has been going “perfectly” in line with expectations, with no major incidents.
Inditex said testing will occur during the autumn-winter season, as originally planned, and the system will be fully implemented in its next fiscal year.
(Updates with executive comments starting in 12th paragraph)
More stories like this are available on bloomberg.com
©2023 Bloomberg L.P.