Inditex has reopened 98 per cent of its stores and predicts the third quarter will see ‘a progressive return to normality’ © REUTERS

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The world’s biggest clothing retailer Inditex managed a return to profit in the summer, thanks to rapid growth in online sales and stores reopening. 

The company, which owns brands including Zara and Massimo Dutti, said online and retail sales had improved steadily from a low in April, when they were just 28 per cent of the previous year’s levels.

By June, they had reached 72 per cent. In July they were 83 per cent and by the month to September 6, they were 89 per cent of the level last year.

“Store sales have been recovering progressively. Online sales continue growing at a remarkable pace,” the company said on Wednesday.

These improvements helped lift the company back to profitability in its second quarter, which ran to July 31. It recorded a net profit of €214m in the period, compared with a €409m loss in the first quarter, which included a €308m provision for updated technology.

Overall, sales in the second quarter were still down 31 per cent from the previous year to €4.7bn. In the first quarter, they fell 44 per cent. Analysts at Société Générale had expected a 36 per cent drop.

The Inditex results come a day after Swedish clothing chain Hennes & Mauritz said it expected to return to profitability, thanks to a stronger than expected recovery since the worst of the pandemic.

“Where both companies have really reassured investors is over margins,” said Anne Critchlow at Société Générale. Inditex had maintained its gross margin of 54.6 per cent for the second quarter, she said, despite expectations of a fall of more than 1 percentage point.

“Inditex has made big advances in how efficiently they manage inventory — using stores’ stock to help fulfil online orders — which really helps support the margin,” she added.

Like many retailers, the company benefited from a surge in online shopping after lockdowns forced shops around the world to shut. Online sales soared 74 per cent from the start of February to the end of July.

Pablo Isla, executive chairman, said the growth in online sales demonstrated the importance of the company’s “integrated store and online” strategy, which was the “cornerstone” of the business.

Inditex, which was founded by Spanish billionaire Amancio Ortega, predicted that, despite rising numbers of Covid-19 infections in Europe and elsewhere, the third quarter would see “a progressive return to normality”. It has now reopened 98 per cent of its stores. During April, barely 1,000 of its more than 7,000 stores were open.

Additional reporting by Daniel Dombey

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