On June 5, 2024, Inditex, the Spanish multinational conglomerate known for its flagship brand Zara, reported a notable uptick in sales driven by its Spring/Summer collections. This positive performance spurred a nearly 5% rise in its shares, reaching a one-month high. The report, which detailed the financial results for the first quarter ending April 2024, indicated that Inditex’s strategic investments in logistics, technology, and innovative shopping experiences have positioned the company well against fierce competition from rivals such as H&M, Shein, and Temu.
First Quarter Financial Performance Of Inditex
Inditex reported sales of €8.15 billion ($8.87 billion) for the three months ending April 2024, slightly exceeding analysts’ expectations of €8.1 billion. This 7% increase in sales marks a deceleration compared to the same period last year when the company saw a substantial boost from a post-pandemic shopping spree. Net profit for the quarter rose by 11% to €1.29 billion, aligning closely with the average forecast of €1.3 billion from analysts polled by LSEG.
The company’s gross profit increased by 7.3% to €4.9 billion, with a gross margin reaching 60.6%, up 13 basis points from the previous year. EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) grew by 8% to €2.4 billion, while EBIT (Earnings Before Interest and Taxes) increased by 10.3% to €1.6 billion. These figures reflect Inditex’s strong operational execution and the effectiveness of its business model, which integrates physical stores with online platforms to enhance customer experience and streamline sales processes.
Spring/Summer Collections Drive Sales Surge
From May 1 to June 3, 2024, Inditex experienced a 12% increase in sales compared to the same period in the previous year. This surge is attributed to the high demand for its Spring/Summer collections, which have been well received by customers despite the cool and rainy start to spring in southern Europe. Analysts, such as Richard Chamberlain from RBC, noted that this could indicate pent-up demand, predicting a potential 20% increase in sales for the rest of the second quarter.
CEO Oscar Garcia Maceiras stated, “Our Spring/Summer collections have resonated strongly with our customers, and the introduction of innovative shopping experiences like livestreaming has significantly boosted engagement and sales.” These livestream shopping services, initially launched in China, are set to expand to the United States and Britain, providing an innovative platform where consumers can watch live shows presenting the latest fashion trends and purchase items directly. This strategy aims to enhance the shopping experience and boost online sales.
Inditex continues to expand its retail footprint, opening stores in 28 markets during the first quarter of 2024. Notable openings include the launch of its first stores in Uzbekistan at Tashkent City Mall and the reopening of 19 stores in Ukraine. As of April 30, 2024, Inditex operates 5,698 stores globally. The company plans to increase its store selling space by approximately 5% annually until 2026, reflecting its commitment to maintaining a strong physical retail presence alongside its online operations.
Moreover, Inditex launched its upscale Massimo Dutti brand on JD.com in China during the first quarter, aiming to capture a larger share of the lucrative Chinese market. The company’s strategic focus on high-quality, fashionable products and enhanced customer experiences is expected to drive sustained growth.
Inditex faces intense competition from fast-fashion giants like H&M and rapidly growing Chinese-owned online retailers Shein and Temu. To stay ahead, Inditex has invested heavily in logistics and technology to deliver fashion trends swiftly and efficiently. This investment has paid off, with the company consistently outperforming its competitors in recent quarters.
One of Inditex’s key strategies is the continuous improvement of its stores and supply chain. The company plans to invest €2.7 billion in 2024 to enhance store environments and technological capabilities. This includes increasing distribution space for brands like Zara and Bershka, which is expected to add an additional 7.2 million square feet of logistics space by the second half of 2025.
Chief Financial Officer Ignacio Fernández emphasized, “Our ongoing investments in logistics and technology are crucial for maintaining our competitive edge and meeting the evolving needs of our customers.”
Inditex is also focusing on sustainability, a growing concern among consumers. The company is implementing eco-friendly practices across its operations, including the use of sustainable materials and energy-efficient store designs. This commitment to sustainability is not only a response to consumer demand but also a strategic move to differentiate itself in a crowded market.
Reflecting its strong financial performance, Inditex’s Board of Directors will propose a dividend of €1.54 per share at the upcoming Annual General Meeting (AGM). This dividend will be paid in two equal instalments of €0.77 per share, with the final payment scheduled for November 4, 2024. Additionally, the board will propose the renewal of Baroness Denise Kingsmill and the appointment of Belén Romana García as independent board members. Flora Pérez Marcote is also set to be appointed as a proprietary director, replacing Pontegadea Inversiones’ legal representative.
CEO Oscar Garcia Maceiras commented on these changes, stating, “These appointments will bring valuable experience and perspectives to our board, supporting our strategic goals and reinforcing our commitment to strong corporate governance.”
