Fashion retailer Inditex returns to profits

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The world’s largest clothing retailer, Inditex, managed a return to profit this summer, thanks to rapid growth in online sales and the reopening of stores.

The company, which owns brands such as Zara and Massimo Dutti, said online and retail sales improved steadily from the April low, when they were only 28% of l ‘last year.

By June, they had reached 72%. In July, they were 83 percent and in the month up to September 6, they were 89 percent of last year’s level.

“In-store sales have gradually recovered. Online sales continue to grow at a remarkable rate, ”the company said Wednesday.

These improvements allowed the company to return to profitability in the second quarter, which ended on July 31. It recorded a net profit of 214 million euros for the period, compared to a loss of 409 million euros in the first quarter, which included a provision of 308 million euros. updated technology.

Overall, second-quarter sales were still down 31% from a year earlier, at 4.7 billion euros. In the first quarter, they fell 44%. Societe Generale analysts expected a drop of 36%.

Inditex’s results come a day after Swedish clothing chain Hennes & Mauritz said it expected a return to profitability, thanks to a stronger-than-expected recovery from the worst of the pandemic.

“Where the two companies have really reassured investors is on the margins,” said Anne Critchlow of Société Générale. Inditex maintained its gross margin of 54.6% for the second quarter, she said, despite expectations of a decline of more than 1 percentage point.

“Inditex has made great strides in efficient inventory management – using store inventory to help fulfill online orders – which really helps support margin,” she added.

Like many retailers, the company has benefited from a surge in online shopping after lockdowns forced stores around the world to close. Online sales soared 74 percent between the beginning of February and the end of July.

Pablo Isla, Executive Chairman, said the growth in online sales demonstrates the importance of the company’s “integrated and online store” strategy, which was the “cornerstone” of the business.

Inditex, which was founded by Spanish billionaire Amancio Ortega, predicted that despite the increase in the number of Covid-19 infections in Europe and elsewhere, the third quarter would see “a gradual return to normalcy”. It has now reopened 98% of its stores. As of April, just 1,000 of its roughly 7,000 stores were open.

Additional reporting by Daniel Dombey

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