Inditex, the world’s biggest clothing retailer, cut inventory and operating costs in the third quarter as sales rebounded to close to the levels of a year ago, despite the effects of the pandemic and the impact of working from home on the fashion industry.
In results published on Tuesday, the Spanish group, best known for its Zara chain, reported sales of €6.05bn in the three months to the end of October, a 14 per cent fall on the same period a year ago. Net income dropped 26 per cent to €866m — although the decline was 13 per cent when currency fluctuations were excluded.
The company said it had reduced its inventory by 11 per cent and operating expenses by 10 per cent in the quarter.
It said sales, which in August were 87 per cent of their level in the same month last year in constant currency terms, had reached 94 per cent by October. In April, the corresponding figure was just 28 per cent, contributing to a net loss of €409m for the February-April period.
Pablo Isla, executive chairman of Inditex, said: “These results are the direct consequence of effective management in every area of the company and the ability to react and adapt in an unpredictable environment.”
He added that the company expected inventories to grow less than sales in the future — largely because of the group’s employment of technology and its stock management, including using stores to help satisfy online demand.
Shares in the group lost initial early gains on Tuesday to sit 2.8 per cent lower by mid-morning in Madrid.
The coronavirus crisis has accelerated the company’s digital shift, with online sales growing 75 per cent in the nine months to October compared with the same period last year. By contrast, 5 per cent of its stores remained closed in the third quarter and 88 per cent were subject to restrictions.
“It’s not been an easy challenge for Inditex — people haven’t been so focused on fashion in a year most of us have mostly spent at home,” said Anne Critchlow, retail analyst at Société Générale.
“But they have managed to keep up sales, because their short lead time for products allows them to adjust their offering to more comfortable clothes and the fact they use stores for stock helps them keep customers supplied.”
The company said that, because of what it characterised as a strong recovery in its operations, it would resume its normal dividend policy for the full year of 2020. However, it acknowledged the latest round of restrictions and closures that began in mid-October. Several countries have toughened such restrictions in recent days.
Ms Critchlow added: “One problem they have had that’s a little hidden by the primary effects of the pandemic is currency — the weakness of currencies in emerging markets, where much of their growth strategy is focused, took 4 per cent off sales and 13 per cent off profits in the third quarter.”
Asked whether it was considering store expansion in markets such as the UK, where competitors are closing outlets, Inditex said it remained committed to “optimising stores” — which often means concentrating on fewer, larger outlets in prime locations. It noted that it had already doubled the size of its Bluewater store in London and relocated a showpiece outlet in Beijing.
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