August 6, 2020

Inditex increases its sales and profits in the first nine months and improves its margins | Economy



Inditex improved its sales and profits again in the third quarter of its fiscal year (August, September and October). The owner of Zara, Massimo Dutti or Pull & Bear reached sales of 18,437 million euros in the first nine months of the year, 3% more than in the same period last year, and obtained a profit of 2,438 million, a 4 % plus. According to the company, the improvement of the result had to do with the improvement in margins, due to the fact that they did not enter into any discount campaign in September, although it was very hot and detrimental to the sales of the fall collection, and strict control of expenses.

As reported by the company in a note, despite a currency impact that weighs down the results by 4.3% in the first nine months, it has achieved an improvement of 56 basis points in the gross margin, which stands at 58% of sales (10,695 million euros, 4% more), while the pre-tax margin reached 16.7%, with a growth of 3% (it would have been 14% without the currency effect). With these margins and with sales of 18,437 million worldwide, it obtains a net profit of 2,438 million, 4% more.

The company also analyzes the performance in the second half of 2018, also positive, with a sales growth of 3%. This is where the meteorological heat factor stands out in September in Europe. In fact, according to Inditex, sales accelerated in October and November, with an advance of 5%. Despite that warm September, Inditex decided not to carry out promotions at the beginning of autumn, as other groups did, which benefited its margins, despite a negative currency effect of 3.2% in the semester.

According to Marcos López, director of investor relations at Inditex, the results "reflect the good performance of Inditex's business model". In a note, Lopez highlights the good start of the autumn campaign, despite an "extraordinarily warm September" in the main European markets and the fact that Inditex "decided not to participate in the promotional environment that occurred in the sector" from that month. Therefore, it affirms that the company maintains its expectations for the remainder of the year.

Regarding the number of stores, at the close of the first nine months, the group had 7,442, compared to 7,504 in the same period of the previous year. Only Zara Home and Uterqüe win stores in the period. However, its number of stores increases compared to the previous quarter, when it closed with 7,422. The company set a target for this year's growth of between 150 and 200 stores, an objective that has not been modified. Much will have to run in the last part of the year to reach it.

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