Zara owner Inditex unveils record-busting earnings

Zara owner Inditex has unveiled record earnings as shoppers flocked back to stores despite the rising cost of living.

The world’s largest fashion group, which also owns the Pull & Bear and Bershka brands, revealed earnings growth of a fifth to £7.6billion last year, following a bounce-back in store sales and efforts to reduce costs.

Sales surged 17.5 per cent to £28.8 billion for the year, with in-store sales rising by 23 per cent. 

Inditex told shareholders that online traffic and store sales grew ‘markedly’ during the period, a trend that has continued in recent months.

Record earnings: Zara owner Inditex has unveiled record earnings as shoppers flocked back to stores

Store and online sales rose by 13.5 per cent year-on-year between 1 February and 13 March, as spring and summer collections were ‘well received’ by shoppers, according to the group.

The group’s dividend has been upped by 29 per cent to 1.20 euros per share.

Inditex chief executive Oscar Garcia Maceiras, said: ‘The excellent results of 2022 show the strength of our business model and its ability to move towards the next level of development in which our fashion proposition, the experience of our customers, our commitment to sustainability and the talent of our teams will continue to be key.’

Maceiras, who took the top job at Inditex in late 2021, said it had been a year of ‘great intensity’ since Inditex founder Amancio Ortega handed the chairmanship to his daughter Marta Ortega. 

Higher capital expenditure sums than expected helped drive the firm’s shares down around 5 per cent earlier today amid choppy markets globally.  

In May last year, Zara started charging shoppers who wish to return items to third-party drop-off points a £1.95 fee, which is deducted from the refund sum 

Jefferies analyst James Grzinic, said: ‘The new year has started in remarkably strong fashion in top-line terms.

‘And investments in logistics capacity, in-store tech automation and store expansion seem aimed at supporting strong growth ahead.’

Victoria Scholar, head of investment at Interactive Investor, said: ‘Zara has an exceptional ability to deliver the latest fashion trends to the mass market. 

‘This affordable luxury segment has proven to be impressively resilient amid the backdrop of slowing growth, cost of living crises across many of Inditex’s major markets as well as softening consumer confidence and falling real wages. 

‘Although shares had a tough time in the first quarter of 2022 with the onset of war in Ukraine and inflationary pressures, shares have been staging a recovery off the April lows.

‘Shares are giving back some gains today caught up in broader risk-off sentiment after a more than 10% jump year-to-date. Given that Inditex tends to be among the most favoured stocks in the sector, perhaps investors were disappointed that its results were in line rather than surpassing analysts’ expectations today.’

H&M unveils smaller rise in sales than expected 

H&M, the world’s second-biggest fashion retailer, unveiled a smaller-than-expected rise in sales on Wednesday, in the latest sign it is struggling to compete with Inditex.

Shares in H&M were down 6 per cent in afternoon trading, underperforming the wider Swedish market, according to Reuters data.

The Swedish group said sales measured in local currencies for the period, its fiscal first quarter, rose 3 per cent from a year earlier.

Sales: H&M today unveiled a smaller-than-expected rise in sales

Sales: H&M today unveiled a smaller-than-expected rise in sales

Jefferies said local-currency sales, the figures most watched by markets, were significantly lighter than consensus estimates and implied that sales in reality fell 3 per cent last month.

The broker called the results ‘worse than feared’ and said it expected a loss in earnings before interest and taxes when the group reports its full first quarter results on 31 March. 

H&M, which is in the middle of a plan to reduce staff and cut other costs, saw net sales growth of 12 per cent from a year earlier.

But H&M’s profits fell last year as it was unable to fully pass on soaring raw material, freight and energy costs in an attempt to retain its price-sensitive customers.

Royal Bank of Canada said it expected continued input cost increases in the first quarter for the retailer and that it would stay under pressure into the second quarter.

It predicted possible improvements at the end of the second and start of third quarter, citing low prices to appeal to H&M’s core customer base, improvements in womenswear, and a new creative director.