Zara-owner Inditex’s quarterly profit jumps 80 per cent on post-COVID wardrobe renewal

Fashion giant Zara’s owner Inditex (ITX.MC) reported on Wednesday its quarterly profit jumped 80 per cent on the back of soaring sales as consumers stuck at home during the pandemic revamped their wardrobes.

Net profit for the February-April quarter rose to 760 million euros ($812.06 million), in line with analysts’ expectations as the company surpassed pre-pandemic levels while its gross margin hit a 10-year high, the company said.

First-quarter sales rose 36 per cent to 6.7 billion euros as the company managed to offset higher costs with price increases at the beginning of the year.

In the first quarter of 2019, before the pandemic struck, Inditex reported a profit of 734 million euros and sales of 5.93 billion euros.

Inditex’s CEO Oscar Garcia Maceiras said in a statement that this set of earnings is the result of a “well-differentiated model that is delivering strongly”.

The company said its gross margin came in at 60.1 per cent, the highest level in a decade, while operating expenses grew 24 per cent, a slower pace than sales.

The giant fashion retailer’s sales seemed to decelerate at the start of the second quarter as the company said its spring-summer collection sales were up only 17 per cent in constant currency between 1 May and 5 June 2022.

“Inditex first-quarter results confirm that a reopening world has provided the ideal backdrop to the group’s affordable fashion offering”, Jefferies said on Wednesday in a note to clients.

The ongoing recovery in Britain, Europe and the United States helped Inditex make up for part of the lost revenue in Russia after the company closed its 502 shops there in March following Moscow’s invasion of Ukraine.

Excluding the 216 million euros related to store closures in Russia that were booked in the reported quarter, Inditex reported a profit of 940 million euros.

Russia was Inditex’s second-largest market in terms of shops and accounted for 5 per cent of its sales growth from Feb. 1 to March 13, according to the company.

Best known for the fast-to-market Zara brand, which accounts for 71 per cent of the company’s sales, Inditex outperformed its main rival H&M (HMb.ST) as the Swedish clothing company posted net sales of $5.1 billion in the first three months of its fiscal year 2022.

The company’s board will propose a total dividend payment from 2022 profits of 0.93 euros per share.