Inditex posts 7% net profit uptick amid rapid online growth

Zara Inditex update

Inditex has attributed a jump in its annual net profit to double-digit online sales growth, despite negative currency headwinds weighing on margins.

The retail company, which owns fashion chains Zara, Massimo Dutti, Stradivarius, Pull & Bear and Bershka, reported a seven per cent rise in net profit to €3.37 billion (£2.98 billion) for the full year period ending January 31. This was in line with analysts’ expectations.

In a first for the Spanish firm, Inditex unveiled its online sales figures, revealing a 41 per cent surge over the year thanks to ongoing investment in its digital offering in recent years.

Online also now accounts for 10 per cent of Inditex’s total sales.

However, sales in stores that have been open for a year or more – or like-for-like sales – rose by five per cent. This was a marked slowdown from the 10 per cent growth reported in the previous period, and Inditex’s slowest since 2015 when the figure also rose by five per cent.

Despite this, the company’s like-for-like figures are still better than many of its competitors, especially the H&M Group which is expected to report a decline in like-for-like sales later this month.

Meanwhile, due to a stronger euro, Inditex’s gross margin was down from 57 per cent in 2016 to 56.3 per cent in 2017 – the lowest in a decade.

The firm generates more than half of its sales in more than five dozen countries that do not use the euro, but because it produces most of its products in Spain or Portugal, the weakening of those currencies against the strong euro has chipped away at revenue reported in euros.

Based in Arteixo in north-west Spain, Inditex is the biggest fashion retailer in the world by market value.

Its total store estate in 2017 increased by 2.5 per cent to 7475, and it currently trades in 94 markets globally.

Inditex group chief executive Pablo Isla said “the prescient investments made in technology and logistics in recent years, coupled with space optimisation, mean the company is well placed for continued growth across all its markets”.

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