Inditex warns of new problems in the supply chain and accelerates its garment inventories

Inditex has presented this Wednesday its results for the first half of its fiscal year. Six months that close with record sales and profit figures, but also with a warning to the market: the tensions in the supply chain are not over.

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As for the data, the owner of Zara closed these six months -until July 31- with a net profit of 1,794 million euros, 41% more than in the same period of 2021. Meanwhile, sales shot up a 24.5%, up to 14,845 million euros, as reflected in the presentation of results that it has sent to the National Securities Market Commission (CNMV).

In that presentation he also breaks down that these tensions in the chain have not ended and that, for this reason, he has decided to accelerate his inventories in recent months, to avoid possible stock breaks.

“To increase product availability in the face of possible tensions in the supply chain [en el segundo semestre del ejercicio 2022] Inditex has temporarily anticipated the inventory entries of the autumn/winter campaign without modifying its level of commitment”, he indicates, referring to the fact that it has not changed your supplier model. “For this reason, the inventory as of July 31, 2022 grew by 43%. Fall/Winter inventory is of high quality and consistent with the positive sales trend in recent quarters and strong growth so far in the second half. As of September 11, 2022, inventory levels are 33% higher,” he adds.

In the conference with analysts that it has held this Wednesday, the company led by Óscar García Maceiras has stressed on several occasions that the objective of this movement has been to "anticipate" and that it is not a unique case in the sector, because other operators are also accelerating your purchases to avoid possible tensions in the chain.

The margin remains despite inflation

The company has not gone into detail about how inflation is affecting the different markets in which it operates. It has delved into the fact that its gross margin, the difference in income and expenses has not suffered and that it maintains the strategy of punctual price increases. Already in the last presentation of annual results, in March, recognized that, as an average in the group, the price increase was in the "medium single digit" and that, in Spain, "the average increase was 2%".

This Wednesday it has broken down to the market that its gross margin grew by 24.5% compared to the first half of 2021 and that it stood at 8,594 million euros. Specifically, this margin represents 57.9% of sales and is the highest figure in the last seven years.

"Based on the information available, Inditex expects a stable gross margin of around 50 basis points for the 2022 financial year." In addition, he adds that "the control of operating expenses has been rigorous" because its operating expenses have grown by 20% in the first half of the year, less than the growth in sales, which have grown by 24%.

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