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Zara owner Inditex has another good year, e-tail and eco help

Inditex sales rose above €26 billion for the first time ever in the year to January 31 with a 3% increase (or 7% currency-neutral) driving revenue to €26.14 billion. And the good performance seems to be continuing with store sales in local currencies up 7% in the period since the financial year ended. Management estimates like-for-like sales growth of between and 4% and 6% for the current year. But analysts and investors weren't happy and its shares fell as the firm didn't grow quite fast enough.

Looking back at last year, it was actually a powerful performance in what was a very troubled time for fashion retail in some markets. Although new stores are helping to drive sales higher, the group is clearly still able to push its comparable sales up and they rose 4% in the year, with strength across all geographies. And it was helped by a 27% increase in e-sales. They reached €3.2 billion and now make up 14% of the fashion retail giant’s total in those markets where it has both a physical and online presence. It all drove net profit 2% higher to €3.44 billion, although it was up 12% currency-neutral. Meanwhile its profit on an Ebitda basis also reached an all-time high, “supported by strong margins.” Gross profit rose 4% to €14.8 billion supporting a 39 basis point increase in gross margin to 56.7%. The group avoided too many markdowns and Ebitda reached €5.46 billion, up 11% in local currencies. The company also said it’s raising its dividend and is increasing the pot of money used for employee profit sharing. STORES AND E-STORES The company ended the year with 7,490 stores in 96 markets and its newest stores are now larger and offer more customer services. The average size of new stores opened in 2018 was 39% larger than the 2012 openings, or 50% bigger in Zara’s case. These stores are custom-made to appeal to the modern shopper with plenty of tech and a big focus on sustainability. New stores opened in 56 markets last year and saw it focusing on prime locations and adding in the latest tech to maximise its omnichannel offer as click & collect and order in-store expands.

All Inditex stores will also be eco-efficient in 2020, with 86% already there at the end of last year. In China, all of the group’s stores are already eco-efficient. Digital is a key focus for the company and last year, its websites registered 2.94 billion visits, reflecting growth of 500 million year-on-year, while orders fulfilled per minute reached a peak of 9,500. The social media profiles of the group’s eight brands added 22 million followers in the last year, reaching a total of 143 million followers. Company chief Pablo Isla has said that all of the group’s brands will be available online worldwide in 2020. As part of that strategy, in November, Zara launched its global online store in 106 markets in which it has no stores, as well as rolling out its online platform in Australia and New Zealand, where it does have a physical presence. This month, Zara will launch online sales in Brazil, where it has 57 stores which will be fully integrated after the launch. The brand also plans to launch its integrated platform with the start of online sales from the spring season in the UAE, Dubai, Saudi Arabia, Egypt, Indonesia, Israel, Lebanon, Morocco, Serbia, South Africa and Ukraine. In 2018, Zara also updated its website image and mobile app, adding features that boost browsing and zooming in on specific trends in its ‘corner shop’ section. And the online rollout/upgrade plan continues for its other brands such as Uterqüe and Massimo Dutti, while the company also plans to progressively incorporate Zara Home products onto the Zara website from AW19 across a number of markets. It’s also expanding its same-day delivery offer globally. Chairman and CEO Pablo Isla said: “our investments in both logistics and stores in order to leverage the integrated platform, as well as our continued focus on prime locations, has enabled Inditex to offer customers a consistent and appealing proposition globally, across all our brands and channels”.

By Sandra Halliday

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