Zara owner Inditex bounces back from virus slump

Spanish textile titan Inditex, owner of global fashion retailer Zara, said on Wednesday, September 16, that it swung back into profit in the 2nd quarter as it reopened most of its stores following virus shutdowns and enjoyed strong online sales.

The group, which also owns the Bershka and Massimo Dutti brands, posted a higher-than-expected net profit of 214 million euros ($253 million) in the 3 months from May to July.

Inditex, which runs its business year from February to January, had booked a loss of 409 million euros in the previous quarter – its first Q1 loss in nearly 20 years – when it was forced to close more than 90% of its 7,000 shops around the world due to COVID-19 lockdown measures.

The 2nd quarter results were better than analysts’ expectations for net profit of some 58 million euros. 

Inditex said 98% of its stores had reopened, although they are operating at a limited capacity and with reduced hours in certain countries because of the pandemic.

The “3rd quarter continues to see a progressive return to normality, with online sales growing sharply and store sales recovering gradually,” the company said in a statement.

In the period from May to July, sales rose to 4.73 billion euros from 3.30 billion in the previous quarter.

But the figure is down by 32% when compared to the 2nd quarter of 2019.

For the 1st half, Inditex posted a loss of 195 million euros. 

Internet sales surged by 74% during the 6-month period as it began selling online in 9 more countries, including Argentina and Peru.

“I am particularly pleased with our online sales growth, which demonstrates the critical importance of our integrated store and online platform strategy,” Inditex executive chairman Pablo Isla said in the statement.

The retailer said it recently recorded one million online orders in a single day for the first time as many customers switched from shopping at the company’s shops.

Since 2012, Inditex has invested around 2.5 billion euros in beefing up its online sales by reducing its stock of smaller older shops and investing in larger stores in high-profile locations.

The company aims to have digital sales account for at least 25% of all sales in two years, up from 14% in 2019.

Inditex’s results compare positively to those of its biggest rival, Sweden’s H&M, which posted a net loss of 477 million euros in the 2nd quarter before returning to profit in the 3rd.

The COVID-19 outbreak that began in China late last year and spread around the world prompted governments to close businesses and order millions of people to stay at home to try to slow the contagion, causing retail sales to slump. – Rappler.com