Inditex reports record quarterly profit, develops its business model

Inditex reports record quarterly profit, develops its business model

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Óscar García Maceiras, who was appointed CEO of the InditexPablo Isla

Óscar García Maceiras, CEO of Inditex – Inditex

“We recorded strong sales growth in the first quarter,” said the former state lawyer, highlighting the outstanding performance of the StradivariusBershkaZara

1.1 billion euros invested in 2022

“The main driver of growth has been the desire of customers to return to normality,” acknowledged the CEO of the company, which currently has 90% of its store network up and running. Store closures are only concerning 67 stores in China, given the impact of Covid-19, and in Russia and Ukraine, where both physical and online stores have been shut down since the beginning of the war. To offset the effect of the conflict on the company, Inditex added an extraordinary charge of 216 million euros in the first quarter accounts to “cover all expenses” estimated in both markets during the year. The company’s net profit would have risen to 940 million euros if this provision had not been applied.

While the CEO insisted it had recorded a “very remarkable performance across all regions” (of which does not provide segmented sales data in its quarterly results); the United States, which became Inditex’s second largest market in terms of turnover last year, was highlighted thanks to its “strong progression.” At the same time, the company announced an investment of 1.1 billion euros this fiscal year to boost its “differentiation, digitalization and sustainability.”

“The goal is to increase our differentiation to offer a unique customer experience,” the executive added.

Interior of the recently inaugurated Zara store in Plaza de España, Madrid – Inditex

In terms of physical stores, Inditex opened stores in a total of 16 international markets during the first three months of the year. At the end of the period, the group operated 6,423 stores, 335 fewer than on April 30, 2021. Although all the group’s brands closed points-of-sale, Massimo DuttiUterqüe chain, with 117 closures, down to 633 stores. Zara remains the brand with the most developed retail network (1,947 stores, including Zara Home

Stable prices and progressive chargeback collection

Meanwhile, online sales at constant exchange rates were 6% lower than in the same period last year, when they grew by 67%, due to “the strong comparable base.”

“By 2024, we expect online sales to exceed 30% of total turnover,” said Maceiras. In 2019, before the pandemic hit, the online channel accounted for 14% of total sales.

Regarding price increases, the CEO opted to maintain a prudent stance. After having announced a selective price increase of up to 2% given inflation, during the presentation of the annual results last March, the executive explained that “Inditex will keep its pricing policy stable, with selective actions in the most affected markets to protect margins.”

The Inditex group’s director of capital markets, Marcos López, explained that the method of charging for online returns at home or at a collection point introduced at the end of last year, reflected in a flat fee of almost 2 euros, “is not having an impact” on either sales or customer satisfaction. For the executive, the goal of this initiative, which is already operating in 38 markets, is to “make the industry more efficient and sustainable.”

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