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Inditex outperforms competing H&M as sales top pre-pandemic levels

World’s major clothing retailer Inditex has affirmed that it has bounced back from the pandemic by making higher sales, profits and cash generation than it logged in pre-pandemic levels.

Amid May and July, Inditex’s revenue hit €6.99 billion, 1.4 percent higher than the record high for the corresponding period in 2019 – aided by a growth in consumer demand and the expansion of online sales.

Inditex-outperforms-H&M-sales
Figure: Inditex has affirmed that it has bounced back from the pandemic by making higher sales, profits and cash generation than it logged in pre-pandemic levels. Courtesy: Collected

Its results on Wednesday contrast with rival H&M, which reported overall sales that remained below 2019 despite a recovery from last year and a return to pre-pandemic levels in Europe and the Americas.

Whereas, its rival H&M, sales grew less than anticipated from a year ago in the three months through August, and remained stuck below pre-pandemic levels. H&M said lockdowns and restrictions hindered its development, and particularly in Asia.

Inditex announced that its net profit for the three months scaled to a record €850 million, while cash reserves increased to €8 billion compared with €6.49 billion in July 2020 and €6.73 billion two years prior.

Inditex Executive Chairman Pablo Isla said that sales in stores and online were progressively recovering across all brands and markets, despite some restrictions in Asia due to the pandemic.

Margins raise

By contrast, Inditex said in a trading update that its sales in local currencies between August 1st and September 9th were 22 percent higher than the corresponding period in 2020 and 9 percent higher than the equivalent period in 2019.

Isla said, “99 percent of the retailer’s stores were now open. Margin of profit for the first half of the year was 57.9 percent, with the company forecasting 57.5 percent for the full year, compared with 55.8 percent last year.”

Inditex added that online sales in local currencies for the six months to the end of July were up 36 percent on the same period in 2020 and 137 percent on the equivalent period of 2019.

It predicts online sales to account for more than a quarter of full-year revenue. In 2019, online represented just 14 percent of total sales.

Inditex, best known for its Zara brand, had been hard hit by the onset of the pandemic. At times, 95 percent of its stores were closed. In March last year it wrote off €287 million in inventories and a month later reported its first loss as a public company – of €409 million. The fourth quarter last year also disappointed as infection rates rose once more and many stores shut again.

Online sales boom

Throughout the COVID-19 calamity, Inditex focused online sales and shut its smaller outlets worldwide in favor of expanding flagship stores able to function as mini distribution hubs.

Inditex said 99 percent of all of its stores have reopened and is currently operating 6,654 stores worldwide compared with 7,337 stores a year ago.

Chairman Isla said one of its biggest Zara stores will open in Paris by October and its Uterque brand will integrate into Massimo Dutti stores by next year, under a digital transformation strategy that he said was being accelerated. Inditex said that this year it had opened or expanded flagship Zara stores in locations such as Barcelona, Cairo and Guangzhou and was planning others in London, Paris and Cape Town.

It plans to integrate its Uterqüe range within its upmarket Massimo Dutti brand over the next year. At the end of July, Inditex had 6,654 stores across the world.

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