Inditex’s machinery is running at full throttle and there are no signs that it is going to slow down, at least in the short term. The textile giant has started the year as it ended the previous one: with record profits and sales. The company, owner of brands such as Zara, Massimo Dutti, Bershka and Oysho, have closed their best first quarter (February-April) in history with a net result of 1,168 million euros, 54% more than in the same period of 2021 Billing has grown by 13%, up to 7,611 million, as reported by the company on Wednesday, thus consolidating its position of world leadership in the sector. The titles closed this Wednesday with a value of 33.63 euros after a rise of 5.69%. That means a market capitalization of the company of 104,800 million euros, so that the group caresses its all-time highs in the capital markets.
The blow that inflation has inflicted on the global economy, and the erosion in purchasing power, have not made a dent in Inditex’s results, which have been above analyst forecasts. With these results, the company chaired by Marta Ortega chains five quarters breaking records and leaves the blow of the pandemic far behind. Inditex attributes this constant growth to the “creativity” of its teams and the “flexibility” of the business model which, together with the supply in proximity during the campaign, “allows a rapid reaction” to customer demands, according to a statement. . And he assures that the company continues to have “great potential for growth”.
Sales had “a very satisfactory evolution both in store and on-line, and they have been positive in all geographical areas and in all formats”, explains the company. Sales at constant exchange rates have grown by 15%. Inditex also anticipates that the turnover registered so far in the second quarter (between May 1 and June 4) has increased by 16% compared to the same period in 2022.
In recent years, Inditex has integrated the physical and on-line and it has centralized them in stores, which are being renovated and reorganized around larger establishments, with the capacity to cover both channels. The result has been an increase in store productivity and optimization of space. The gross margin has experienced a growth of 60.5% in the first quarter, up to 4,603 million, and stands at 60.5% (34 basis points more than in the first quarter of 2022). Operating expenses have grown by 13%, below the increase in sales. Cash continues to grow, 14% in the first quarter, up to 10,508 million euros.
Last year was one of the years with the most changes for Inditex. The departure of Pablo Isla in April of last year as president, a position he had held since 2011, marked the end of the generational change in the group. The new dome is now headed by Marta Ortega, youngest daughter of the founder and top shareholder, with 60% capital, Amancio Ortega. Her position is not an executive, tasks that fall to the new CEO, Óscar García Maceiras.
The improvement in results occurs despite the absence in the income statement of Russia, which until 2022 was its second market. Inditex left the country last year after the invasion of Ukraine. The impact of the cessation of operations meant a provision of 216 million in the first quarter of that year.
Inditex opened stores in 17 markets during the first quarter of its fiscal year and operates 5,801 stores in 213 countries.
Stock Market Evolution
The new Marta Ortega’s Inditex has managed to earn investor confidence in recent months. After the departure of Isla, announced on November 30, 2021, the titles began a downward path that intensified with the outbreak of the war in Ukraine, on February 24, 2022, and the closure of the firm’s operations. in Russia.
But starting in the autumn there was a comeback that, gradually, has led the action to gain around 50% of its value. What’s more, on June 2, it boosted its listing levels to a maximum in a year and a half, in November 2021, and again exceeded the barrier of 100,000 million capitalization (100,200 million). The capitalization has exceeded this mark this Wednesday, up to 104,813 million euros, which places the textile giant, by far, in first place on the Ibex.
Elimination of hard alarms
The company was known for years for its efficient logistical machinery, but since Marta Ortega became president, more and more emphasis has been placed on design and collections. The focus has also been placed on the customer experience in stores. For example, you are preparing to roll out new security technology that eliminates hard alarms and speeds up checkout and avoids queues. The goal is for them to be available in all Zara stores globally in July to begin test operations in the fall/winter campaign.
Inditex also points out in the statement released this Wednesday that “a recent key project has been the new Zara store design created by our architecture studio, which organically integrates the most sophisticated interiors with functional and digital spaces, such as changing rooms, areas self-collection, collection points on-line, silos and replacement areas”. This new store design is being reflected in the openings, expansions or relocations of Zara in Paris (Champs Elysées), London (Stratford), Miami (Dadeland), Mumbai (Phoenix Palladium) and Johannesburg (Sandton).
Inditex plans to invest around 1,600 million in 2023 “to increase operating capacity, obtain efficiencies and increase differentiation to the next level”.
As approved last March, the Board of Directors will propose to the General Shareholders’ Meeting the approval of a dividend of 1.20 euros per share charged to the results of the financial year 2022. The dividend consists of two equal payments of 0.60 euros per share: the first was paid on May 2, 2023 and the second will be paid on November 2, 2023.
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