Inditex breaks record sales and profit but with the lowest growth in its history | Economy

Inditex it returned to beat its marks in 2018, but it did it with the smaller increase of sales of its history. The Galician textile giant, owner of Zara, Massimo Dutti or Pull & Bear, exceeded for the first time the 26,000 million euros in sales, up to a total of 26,145, 3% more than in the year 2017, as reported by the company through a relevant event sent to the CNMV. However, it is the lowest rate of sales growth at least since, in 1998, the company recorded results before going public. The benefit reached 3,444 million euros, 2% more than 3,368 million registered in 2017, also far from the rates of recent years. Without going any further, the chain's profit grew by 6.7% in 2017 compared to the previous year. The company attributes to the currency effect the reduction of growth in sales and profits.

The year 2018 was irregular for Inditex. It started really loose, with a rise of just 1.5% in sales, ballasted, affirmed the company, due to a very negative currency effect. It accelerated in the second quarter of the year, with an increase of 4.4% (3% accumulated in the semester), although the currencies also weighed in the accounts. In the third, although the president of the company, Pablo Isla, predicted a new acceleration, the growth rate fell back below 2%, leaving the average at that time of the year at 2.6%. Far from the double-digit increases or almost marked in each quarter from 2015 to 2017.

In the fourth, traditionally the strongest in sales for the company - November, December and January - the business again stretched, with an increase of 4.5%, to reach 7,708 million. In the accumulated of the year, the sales figure goes to 26,145 million, an increase of 3.2%, an unknown growth rate for the chain of Amancio Ortega. You have to go back to 2013, with a rise of 4.3%, to see some similar numbers, but that was one of the hardest years of the economic crisis in Spain. For 2019, Inditex predicts a growth of between 4 and 6% of comparable sales, compared to the 4% registered in 2018.

The company affirms that the currency effect has subtracted four points from the sales growth, which would have been 7% if it had not been for exchange reasons. This effect has also heavily weighed the benefits, which would have skyrocketed by 12% if the change had remained constant. Thus, Marcos López, director of Capital Markets at Inditex, underlined the "strong operational performance" of the company in 2018, highlighting that sales at a constant rate would have grown by 7%, and "have been positive in stores and online, as well as in all the concepts and geographic areas ".

The swings recorded throughout the year hampered the action of the textile giant, which was left more than 20% in the stock market in 2018. However, good prospects have returned in 2019, thanks to a currency effect already attenuated, so Recovers 18% in the parquet since the beginning of the year.

Although the Galician giant reiterates that his stock integrated does not make sense to distinguish sales on-line of those registered in the store, Inditex reports in the note that Internet sales grew by 27% in 2018, to 3,200 million euros, which represents 12% of the chain's sales, an average of 14% in those countries that have a store on-line own Zara, which already sells in 106 countries, expects to sell online in 10 more in 2019.

However, the store network continued to grow, although at the slower historical rate. The chain closed the year with 7,490 stores, just 15 more than a year earlier. For this year, the company foresees 50 net openings, with 300 openings and 250 "asbsorciones" (closures). However, the company prefers to talk about commercial surface, since its trend has been for some years to close the less profitable stores and concentrate them in large stores flagship, larger and located in prime locations and with more storage capacity to meet the sale on-line. According to Inditex, during 2018 its commercial area increased by 4.7%, until reaching the five million square meters among all its brands (Zara, with 3.2 million, Pull% Bear, Massimo Dutti, Bershka, Stradivarius, Oysho and Üterque ) and will grow by 5% in 2019. The investment exceeded 1,600 million euros, while it predicts 1,400 for 2019.

The company has decided this year to unify the Zara Home and Zara Home accounts to "maximize the operational and management impact of the brand" and will sell Zara Home products in the store on-line of Zara from next autumn.

The sales space will generate a new burden on the accounts this year. The company announces that during 2019 it will begin to apply the new accounting norm IFRS 16, which obliges it to include in the balance the rents, a regime in which it has the majority of its stores. Inditex affirms that this regulation "will not have any impact" neither on the business nor on the cash flow, but "it will result in an increase of between 2% and 4% in the net profit of 2019", and "a lease liability for between 6,500 and 6,900 million euros ".

More dividend

The company has announced that the board will propose to the next shareholders meeting an increase in the ordinary dividend from 50 to 60% of the benefit, in addition to an extraordinary dividend of one euro per share charged to the benefits of 2018, 2019 and 2020. , for the recently closed accounts, the shareholders will receive 0.88 euros per share as dividend, an increase of 17%.


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