September 24, 2020

Inditex achieves profits in the second quarter despite the crisis but its sales fall by 31%




Inditex managed to make profits in its second quarter of the year, which runs from May to July, despite the coronavirus crisis. Specifically, the owner of brands such as Zara, Massimo Dutti and Pull and Bear achieved a profit of 216 million euros in those three months, 73% less than last year. In addition, its sales fell in that period by 31%, to 4,730 million euros. These results have been very well received on the Stock Market, where shares on the Ibex rise more than 5% in the early stages of the day.

It should be remembered that until almost the middle of May the vast majority of the group’s stores were closed due to the coronavirus crisis. In Spain, one of its main markets, the reopening was marked by a series of restrictions throughout the commercial sector. In fact, the textile group emphasizes that “most of the stores were opened at the end of July” and that the restrictions remain. At the moment, Inditex has 98% of its stores open.

Regarding the results for the first semester, which runs from February to July, Inditex closed with losses of 195 million euros. A figure that contrasts with the 1,549 million it earned in the first half of 2019. This historical negative benefit is conditioned by the provision of 308 million euros that it had to make in the first quarter due to the conclusion of the space optimization program. Without this provision, the benefit would have been positive, up to 39 million euros. In addition, turnover was 8,033 euros, the lowest in the first half since 2013 and 37% lower than a year ago. Ebitda, meanwhile, reached 1,486 million, 56% less than a year ago.

The company highlights that the health crisis has influenced its results up to July, but that in the second quarter it has experienced a turning point. He points out that “to minimize the impact of this situation” the group “has very actively managed its supply chain, inventory and operating expenses. As a result, cash flow dynamics have returned to normal. The flexibility of the business model has been key in the operational and financial performance of the period ”.

Thus, he highlights that «the Spring / Summer collections were very well received by our clients. Our supply chain has functioned normally due to the flexibility of our business model based on sourcing in proximity and the unique inventory position. Inventory integration has proven critical during this period. We have also launched initiatives to adjust operating expenses. The flexibility of the business model has been key in the operational and financial performance of the period ”.

For its part, the online channel continues to grow. Specifically, in the first semester, sales increased by 74%. In this case, the pandemic has had a positive influence on this channel. In addition, within its plan to sell worldwide, the group has reported that it has launched the online sale of Zara in Argentina, Peru, Uruguay, Paraguay, Bosnia-Herzegovina, Albania, Algeria Chile, the Republic of North Macedonia Montenegro, Tunisia and Andorra. During this month of September, it will be launched in Costa Rica, Guatemala, Honduras and Nicaragua.

Zara’s sales, which include Zara Home, in this first semester accounted for 69% of the group’s total. In total, this brand had a turnover of 5,532 million euros until July, more than 3,000 million less than last year. Bershka was the group’s second brand with the highest sales, 692 million euros, while those of Pull and Bear, Stradivarius and Massimo Dutti reached 578, 502 and 490 million, respectively. Those that invoiced the least were Oysho, with 208 million euros, and Üterque, with only 31 million.

As usual, Inditex has made a preview of the second semester. He has reported that “he is seeing a rapid recovery.” Thus, he explains that “store sales continue to recover progressively”, while online “continues to grow at a remarkable rate.” Specifically, in-store and online sales at constant exchange rates have been 11% lower from August 1 to September 6, 2020.

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