Inditex stays on top as first half booms, H2 starts strongly despite margin dip
It’s a tough retail world out there, even for the biggest names, and we've heard about some fairly sluggish performances so far this year. But what about fashion giant Inditex? Has it been able to overcome a mix of weak economies and consumers feeling less need to buy so much fast fashion?
Of course it has. The almost-unstoppable multi-brand retailer released its first half results on Wednesday morning and they showed group revenue up by 11.5% in the first six months of the financial year with no mention of challenging environments or difficult weather patterns.
And just as important, it said that in the second half, between August 1 and September 17, sales in local currencies in stores and online have grown 12% and it seems to be maintaining its strong pace.
NUMBERS UNDER THE SPOTLIGHT
So H2 appear to be going well, but let’s take a closer look at H1. Revenue hit €11.7 billion as the company has continued to expand: it opened new stores in 35 markets during the period to take its total to 7,405 and now employs 11,000 more people than it did this time last year. And the all-important comparable sales growth measure was up a healthy 6% with positive comps across all geographies.
The group reported net profit growth that slightly lagged the overall sales rise, but with a 9% increase to €1.37 billion, it was still up strongly. Profit on an Ebitda basis also rose 9% to €2.29 billion as margins were eroded by the strong euro.
Chairman and CEO, Pablo Isla, emphasised the "strength and sustainability of our integrated offline-online store model, which continues to deliver growth, while creating value for society and the environment in which we operate, including job creation across our markets.”
While Zara is still undeniably Inditex’s star brand, the company said that H1 growth was seen across all of its brands and they all expanded their international footprints, adding stores in 35 countries. Following the launch of seven of its chains in Belarus last month, and with the zara.com platform scheduled to launch in India early next month, the group is now operating in 94 markets, 46 of which have an online presence.
And this expansion also means the need for a larger logistics capacity with the company having started work on the construction of a new logistics centre in Galicia, Spain during the summer, while this month, construction started on a logistics hub in the Netherlands.
More customer-facing improvements during the first six months of the year included all the brand upgrading their online and offline store images and major new stores.
Zara opened a 4,800 sq m Mumbai store, its first street-level store in India, in the historic Ismail Building in Hutatma Chowk Square, in the heart of the city’s shopping and historic district. And it opened a 6,000 sq m location on Castellana 79 in Madrid with LEED Gold certification for its innovative eco-efficiency measures which translate into water and energy savings of 45% and 20%, respectively.
Pull&Bear opened its first flagship store in Paris on Rue de Rivoli and Bershka relocated its central Paris flagship store to the same key shopping street, occupying a larger space spread over two floors in which it has rolled out its Stage store image and concept.
In June, all the brands (Zara, Pull&Bear, Massimo Dutti, Bershka, Stradivarius, Oysho, Zara Home and Uterqüe) opened stores in the Puerto Cancún shopping centre in Quintana Roo in Mexico.
And in July, Oysho opened its first flagship store in Geneva in the central Place du Molard. The group’s underwear and gymwear brand was behind one of the business’s most high-profile openings in the period, a 730 sq m two-storey location on Via Roma, in Turin.
And the company has continued the opening programme in H2 with Zara, Pull&Bear, Massimo Dutti, Bershka, Stradivarius, Oysho and Zara Home opening in the Dana Mall shopping centre in Minsk to mark their Belarus debut, as mentioned.
One store development has also included an important new initiative. Zara has reopened its store in the Marineda shopping centre in A Coruña, Spain, that has been fitted with the new zara.com pick-up point. This allows customers to directly collect their orders placed online through a “fast and simple process”.
The service is being trialled as a potential next milestone in the group’s fully integrated offline-online store model. It works via an optical barcode reader which scans the QR code or accepts the PIN codes received by customers when they place orders online.
In just a few seconds, the system delivers the order to a mailbox platform. Behind the platform, a dynamic robot moves through a shaft with capacity to handle 700 packages simultaneously.
The company has also unveiled some interesting creative commercial initiatives such as the new Zara online project called Shape the Invisible. This initiative was undertaken in collaboration with fashion schools including Antwerp’s Royal Academy, New York’s Parsons, EnsAS of Paris and London’s Kingston University.
The project consists of 60 garments created by up-and-coming designers from these schools, developed from past-season Zara collections.
The latest half also saw Inditex being named the most sustainable company in the retail industry for the second year in a row by the Dow Jones Sustainability Index (DJSI). It scored 78 out of 100 points, much better than the industry average of 30.
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