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Zara owner Inditex unveils record-busting earnings

Record earnings: Zara owner Inditex unveiled record earnings as shoppers flock to stores

Zara owner Inditex unveiled record earnings as shoppers flocked to stores despite the rising cost of living.

The world’s biggest fashion group, which also owns the Pull & Bear and Bershka brands, reported profit growth of a fifth to £7.6billion last year following a rebound in sales in-store and cost reduction efforts.

Sales jumped 17.5% to £28.8bn for the year, with in-store sales up 23%.

Inditex told shareholders that online traffic and in-store sales increased “significantly” during the period, a trend that has continued in recent months.

Record earnings: Zara owner Inditex unveiled record earnings as shoppers flock to stores

Record earnings: Zara owner Inditex unveiled record earnings as shoppers flock to stores

Sales in stores and online rose 13.5% year-on-year between February 1 and March 13, as the spring and summer collections were “well received” by shoppers, according to the group.

The group’s dividend was increased by 29% to 1.20 euro per share.

Inditex Managing Director Oscar Garcia Maceiras said: “The excellent results for 2022 show the strength of our business model and its ability to move to the next level of development in which our fashion proposition, the experience of our customers , our commitment to sustainability and the talent of our teams will continue to be essential.

Maceiras, who took over the helm of Inditex at the end of 2021, said it has been a year of “great intensity” since Inditex founder Amancio Ortega handed over the chairmanship to his daughter Marta Ortega.

Higher-than-expected capital spending helped send the company’s shares down around 5% earlier in the day in choppy markets globally.

In May last year, Zara began charging buyers who wish to return items to third-party drop-off locations a fee of £1.95, which is deducted from the refund amount.

Jefferies analyst James Grzinic said: “The new year has started remarkably strong in terms of revenue.

“And investments in logistics capacity, automation of in-store technologies and store expansion appear to be aimed at supporting strong growth ahead.”

Victoria Scholar, Head of Investments at Interactive Investor, said: “Zara has an exceptional ability to bring the latest fashion trends to the mass market.

“This affordable luxury segment has proven incredibly resilient amid slowing growth, a cost of living crisis in many of Inditex’s major markets, as well as weakening consumer confidence and a decline in real wages.

“Although equities had a tough time in the first quarter of 2022 with the onset of war in Ukraine and inflationary pressures, equities have rallied from April lows.

“Equities are giving back some gains today, caught up in broader risk sentiment after jumping more than 10% since the start of the year. Given that Inditex tends to be among the most popular stocks in the sector, investors may have been disappointed that its results came in line rather than beating analysts’ expectations today.

H&M reports weaker-than-expected sales growth

H&M, the world’s second-biggest fashion retailer, showed weaker-than-expected sales growth on Wednesday, the latest sign that it is struggling to compete with Inditex.

Shares of H&M were down 6% in afternoon trading, underperforming the broader Swedish market, according to Reuters data.

The Swedish group said sales measured in local currencies for the period, its first fiscal quarter, were up 3% from a year earlier.

Sales: H&M today unveiled a weaker than expected sales increase

Sales: H&M today unveiled a weaker than expected sales increase

Jefferies said local currency sales, the numbers most watched by markets, were significantly lower than consensus estimates and implied sales actually fell 3% last month.

The broker called the results “worse than expected” and said it expected a loss in earnings before interest and tax when the group reports its full first-quarter results on March 31.

H&M, which is in the midst of a plan to cut staff and other costs, reported net sales growth of 12% from a year earlier.

But H&M’s profits slumped last year as it was unable to fully pass on soaring raw material, freight and energy costs in a bid to retain its price-sensitive customers.

Royal Bank of Canada said it expects input costs to continue to rise in the first quarter for the retailer and will remain under pressure in the second quarter.

He predicted possible improvements at the end of the second and early third quarters, citing low prices to attract H&M’s core clientele, improvements in women’s fashion and a new creative director.

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