Strong autumn sales offset first-half slowdown at Zara owner Inditex

Fashion giant posts €2.8 billion in net income in six months to end of July

Zara has nine outlets in the Republic and employs about 360 people. Photograph: Bloomberg

Zara owner Inditex reported a rebound in recent sales of its first autumn-winter collections on Wednesday, offsetting a slowdown in sales in the first half of the year that was in line with analysts’ expectations.

The fashion giant said its like-for-like sales between August 1st and September 8th saw an 11 per cent boost compared with a year ago, which countervailed the slowdown in earlier months. Zara has nine outlets in the Republic and employs about 360 people.

The world’s biggest listed fashion retailer reported a 10 per cent rise in first-half profit as sales increased 7.2 per cent – a slower pace than last year but in line with analysts’ forecasts of tougher times for fashion retailers in Europe, partly due to wetter-than-expected weather in early summer.

Despite June’s headwinds, Inditex posted net incomes of €2.8 billion and sales of €18.1 billion in its first half ending in July, while analysts polled by LSEG expected a profit of €2.77 billion with €18 billion in sales.

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Analysts from HSBC, RBC, JPMorgan and Bestinver expected Zara sales to rebound into the double digits in the first five weeks of its third quarter beginning in August, after a wet and cold June in its biggest market, Spain, dashed expectations of a bumper second quarter, as Zara had anticipated.

The fashion company has fought to stay ahead of rivals such as H&M and growing Chinese rival Shein by investing in logistics and technology to deliver fashion trends faster and making an effort to minimise price increases on everyday items.

H&M said June sales were likely to fall 6 per cent in local currencies versus a year earlier, partly due to worse weather in many markets, while the wet weather in Britain also hit summer sales at Primark.

“I don't look at stocks with a short-term horizon and a three-to-five year view. Inditex is the best fashion retailer in the whole brick-and-mortar space, as well as online,” said fund manager Vera Diehl of Union Investment, who considers Inditex's gap with H&M and Shein has widened.

“The company takes long-term strategic decisions,” she said. – Reuters

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