Zara owner Inditex boosted by strong sales of summer clothes

Zara owner Inditex cemented its position as a $100bn company on Wednesday, reporting a bigger than expected rise in profits thanks to robust sales of summer clothes. 

Inditex’s market capitalisation rose to more than €100bn ($107bn) last week, making it the fourth most valuable clothing retailer in the world, behind luxury fashion group LVMH, Nike and Dior, according to data provider Statista.

On Wednesday, the shares rose as much as 6 per cent to €33, the highest since August 2017.

Inditex, which started as a family-run workshop in Spain in the 1960s and also owns the Massimo Dutti and Bershka brands, reported a 54 per cent rise in net profit of €1.2bn in the three months to April, ahead of analyst expectations of €980mn. Sales rose by 13 per cent to €7.6bn.

The retailer, highly regarded for its ability to respond quickly to catwalk trends, has remained popular with customers despite raising prices. It has nearly 7,500 stores in more than 100 markets.

It said it planned to invest €1.6bn to help increase its store space this year by about 3 per cent, after customers returned to physical stores in greater numbers than expected since the pandemic.

“We expect increased sales productivity in our stores going forward,” the company said in a statement.

James Grzinic, an equity analyst at Jefferies, praised the “very strong start” to the second quarter — sales were up 16 per cent year on year from the start of May until June 4 — which “hinted at the tantalising prospect of [profit] margins rising beyond pre-Covid peaks”.

Inditex has staked future growth on further expansion in the US, its second biggest market by sales after its exit from Russia. Its presence in the US remains relatively small compared with countries such as Spain, where it has more than 1,200 shops.

“[The US] is a market in which for every $100 of fashion sold we take less than 50 cents of that. So we see very strong growth opportunities,” chief executive Óscar García said in March.

“We see a handful of global winners in fashion retail taking more market share, as consumers become more discerning,” analysts at RBC Capital markets said in a note this week. “Inditex only has c. 2 per cent market share globally with plenty of scope to take share from weaker specialists, independents and department stores.”