Zara-owner Inditex shares rise to record high on spring season boost

Shares in the world’s biggest fashion retailer rose as much as 5.9 per cent on Wednesday after it reported that sales at constant currencies for Feb. 1 to March 11 jumped 11 per cent. Sales rose 10 per cent to a record 36 billion euros ($39 billion) in the year to January 2024.

“The year got off to a positive start in a complex environment of inflationary pressures and an unstable geopolitical situation,” CEO Oscar Garcia said in a press conference.

The Spanish group is expanding in the U.S., its second-largest market after Spain, and plans Zara store openings in Los Angeles, Las Vegas and Cambridge, Massachusetts, as well as the first Massimo Dutti store in the country that will open in Miami.

The company behind Zara has widened its lead over Sweden’s H&M thanks to its ability to deliver trends faster from nearby suppliers and sell more clothes at higher prices. That has also helped it counter fast-growing Chinese rival Shein.

In January, H&M reported a 4 per cent drop in December and January sales, a bad sign for the key Christmas shopping period. German online fashion retailer Zalando on Wednesday reported a full-year decline in sales.

Inditex posted an annual net profit of 5.4 billion euros, up 30 per cent on the year and in line with analysts’ expectations in an LSEG poll, as the company maintained a gross margin of 57.8 per cent.

Inditex said it planned to invest 900 million euros per year through 2025 on logistics. Those plans include new logistics centres in Zaragoza in Spain and the Netherlands, Garcia said during an analysts call.

It will spend a total of 1.8 billion euros this year to expand its store space by 5 per cent, and on technology and improving online platforms in 2024.

Inditex said it will start weekly livestreaming shopping services for its core brand Zara in the U.S. and UK this year, after offering the e-commerce experience in China since the end of 2023.

Livestreaming is a retail phenomenon that initially became popular in China, combining online shopping, video streaming and texts to sell millions of products, and companies including Durex-owner Reckitt have jumped on the trend.

Garcia said Inditex would expand its second-hand business to the U.S. after its launch in UK in 2022 and later in the rest of Europe last year.

The company had 5,692 stores worldwide in 2023, 123 fewer than a year earlier, and said its inventories in January were 7 per cent lower year-on-year, in part due to the “normalisation in supply chain conditions”.

Inditex said it will increase its dividend payout by 28 per cent to 1.54 euros per share, above analysts’ expectations.

Inditex’s core brand Zara began to raise prices earlier than H&M in response to surging inflation and as part of a shift to offer special, high-fashion pieces, while growing other brands in its budget range.