Zara parent Inditex posts 11% surge in spring sales, beats H&M in annual sales growth

Inditex sales growth: Inditex, the parent company of Zara, has reported a significant uptick in sales for the first half of the spring season, marking an 11 per cent surge in constant currency between February 1 and March 11. This surge comes on the heels of the Spanish fashion powerhouse surpassing its main competitor, H&M, in annual sales growth.

The impressive sales growth underscores Inditex's ability to swiftly deliver fashion trends from nearby suppliers and cater to upmarket shoppers, allowing it to outpace its rivals and shield itself from the formidable rise of competitors like Chinese fashion brand Shein. Conversely, H&M experienced a 4 per cent decline in December and January sales, signalling challenges during the critical Christmas shopping period.

Inditex's annual sales reached a record high of €36 billion in the fiscal year ending January 2024, up from €32.6 billion the previous year. While these results align with analyst projections, the pace of sales growth has moderated compared to the previous year's 13.5 per cent increase, attributed in part to a more moderate increase in prices year-on-year.

To bolster its operations, Inditex announced plans to invest €900 million annually through 2025 in logistics infrastructure.

Zara, Inditex's flagship brand, initiated price increases earlier than H&M as part of a strategy to cater to a more high-fashion market segment, while simultaneously expanding its budget-friendly offerings through other brands. However, Zara's average price hike over the past two years has been slower compared to its competitors, such as H&M and Mango, according to retail intelligence company EDITED.

Investors remain optimistic about Inditex's performance, with its share price trading at 21.8 times expected earnings for the next 12 months, outpacing H&M's price-to-earnings ratio of 16.1. José Ramon Iturriaga, a fund manager at Abante Advisors, attributes Inditex's success to its superior value proposition and anticipates continued growth in the face of inflationary pressures.

Inditex concluded the fiscal year with a net profit of €5.4 billion, marking a 30 per cent increase compared to the previous year and aligning with analyst expectations. This robust performance underscores the resilience of the fast-fashion giant, maintaining a gross margin of 57.8 per cent.

(With Reuters inputs.)