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Strong online growth and renewed customer demand helps to put pandemic sales and profit decline into reverse at Inditex

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Zara, Madrid. Image courtesy of Zara/Inditex
Zara, Madrid. Image courtesy of Zara/Inditex
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Strong online growth and renewed customer demand helps to put pandemic sales and profit decline into reverse at Inditex

Zara to Massimo Dutti parent company Inditex today posted improving sales in the third quarter of its financial year, as its integrated online and store strategy continued to show strong results.

 

Online sales alone were 76% up in the third quarter of the year, compared to the same time last year, as more shoppers bought from home during the Covid-19 pandemic and lockdowns. That helped drive a recovery in overall sales – at €6.1bn (£5.5bn) they were 14% down on sales of €7bn (£6.3bn) last year. That represents a steady improvement on both the second (-31%) and first (-44%) quarters of the year. Overall, the group made sales of €14.1bn (£12.6bn) in the first nine months of the year, between February 1 and October 31. That’s 29% down from €19.8bn (£17.7bn) a year earlier.

 

Online sales rose by 76% in the third quarter – in line with the trend of 75% growth in the first nine months of the year – at a time when 5% of Inditex stores were closed, and trading restrictions affected 88% of stores.

 

Net (pre-tax) profits came in at €866m (£775.98m) in the third quarter, down by 28% from €1.2bn (£1.1bn) a year earlier. That took net profits for the first nine months of the year to €671m (£600.4m), 75% down from €2.7bn (£2.4bn) last time. The company returned to profitability in the second quarter of the year. But a 17% cut to operating expenses in the first nine months of the year – to October 31 – meant that the group built its cash holdings to a record high of €8.3bn (£7.4bn).

 

Inditex executive chairman Pablo Isla says: “These results are the direct consequence of effective management in every area of the company, with a seamless coordination between each link in the business model: design, product, manufacturing, logistics, store and online. They are also evidence of the group’s ability to react and adapt continuously in an unpredictable environment and its unwavering commitment to offering unbeatable product, quality and service.”

 

The group, whose brands also include Bershka, Pull&Bear, and Massimo Dutti, saw its sales grow at record levels between October 1 and 18. Following the end of the third quarter, in November, when 21% of group stores were closed for lockdowns, sales in local currencies came to 81% of the volume seen a year earlier. That rose to 87% between December 1 and 10.

 

Multichannel strategy

 

Digital innovations during the year so far have included new ways for customers to engage with the company via its integrated store-online platform, the Inditex Open Platform. Store Mode, featuring an integrated stock management system, is now operating in 6,000 stores for Zara and Massimo Dutti online shoppers. The group says it is continuing to open larger shops that include next-generation technology. Its Stradivarius brand launched its own Stradishoppers TV channels, designed to move the online shopping experience towards an ‘onlive’ one.

 

Despite the pandemic, the group has opened new stores in 25 markets in the first nine months of the year, from its home market of Spain to China, Russia and Saudi Arabia. It sells online in a clicks and bricks strategy in 85 markets, and through 106 more markets via Zara’s worldwide website.The Zara website has launched in 14 new markets this year, while emerging brand Lefties has launched online in Spain and Portugal.

 

Inditex says it has made progress towards its sustainability targets by removing all plastic bags, enabling recycling in store, and sourcing from sustainably managed and certified forests. Its Join Life label singles out products that are made using particularly sustainable processes - and is set to account for more than 30% of its range.

 

Zara is a Top100 retailer in RXUK Top500 research, while Bershka, Massimo Dutti and Pull&Bear are Top250.

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