Inditex SA reported full-year earnings that came in just behind analysts’ estimates and a slowdown in sales growth in the start of this quarter.
(Bloomberg) — Inditex SA reported full-year earnings that came in just behind analysts’ estimates and a slowdown in sales growth in the start of this quarter.
Revenue in the first five weeks of the first quarter rose 14% at constant currencies, slowing down from 18% growth in the full year through January. Shares of the Zara operator fell as much as 3.6%.
Clothing retailers face tough comparisons in 2023 given last year’s sales boom, which was helped by pent-up demand after pandemic restrictions were lifted. Hennes & Mauritz AB said Wednesday sales rose 3% in local currencies in the three months through February, short of analysts’ estimates.
Among Inditex’s challenges are reversing declines in profit at the Massimo Dutti officewear and Oysho lingerie chains.
The Spanish retailer has been weeding out its weakest stores and now it’s reaping the benefits of a more efficient brick-and-mortar platform, which is reporting higher sales with fewer shops.
That helped boost net cash to €10 billion ($10.7 billion), which will help fund €1.6 billion of investments planned for this year> Projects include expansion in major US cities, a new Zara on the Champs-Elysees in Paris and expanding a platform to sell second-hand clothes in France and Germany.
In addition to Inditex’s store-efficiency program, the company stopped operations in 514 stores in Russia and 82 shops in Ukraine last year due to the war.
The company plans to expand its store network for the first time in four years, with plans to introduce the Oysho chain to the UK and the Stradivarius womenswear brand to Germany. In the US, Inditex is also targeting stores in big cities including New York, Los Angeles, Miami, Boston and Las Vegas.
Inditex is also introducing a new technology to replace security tags on products.
The company is boosting its annual dividend payment to €1.20 a share. Operating profit rose 29% to €5.52 billion in the 12 months through January.
–With assistance from Rafaela Lindeberg.
(Updates with investment plans in third paragraph)
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