Zara owner Inditex shrugs off consumer spending woes as profits jump
The fashion giant reported a 52% jump in pre-tax profits to 1.5 billion euros (£1.3 billion) in the three months to April 30.
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Your support makes all the difference.Zara owner Inditex has notched up a better-than-expected jump in profits over its first quarter as sales leaped higher despite consumer spending pressures taking their toll on the wider sector.
The fashion giant reported a 52% jump in pre-tax profits to 1.5 billion euros (£1.3 billion) in the three months to April 30, with net profits up by 54% to 1.16 billion euros (£999 million), which beat market forecasts.
Its profit haul follows a 13% surge in sales – up 15% with currency movements stripped out – as it cheered higher sales across all its regions globally.
The group said sales growth has remained in double digits, up 16% on a constant currency basis, since May 1 as it said “spring/summer collections continue to be very well received by our customers”.
It comes as rivals have been hit by rising costs and consumers reining in their spending.
Competitor H&M is set to report its latest update on June 15 after its last set of figures showed lacklustre trading in the three months to February 28, with cold weather also impacting demand for spring ranges in many of its markets.
Costs had likewise held back H&M’s profits.
Inditex, which also owns brands including Pull&Bear and Massimo Dutti, said its profitability increased in the first quarter and is set to remain stable over 2023 as it offsets cost pressures.
It expects to increase its shop space by around 3% in 2023, but its latest update showed it had 5,801 stores as at April 30, down from 6,423 a year ago.
Aarin Chiekrie, equity analyst at Hargreaves Lansdown, said it was an “impressive start to the year” for Inditex, but cautioned that its shoppers may not remain immune to the ongoing cost crisis.
He said: “Double-digit sales growth has outstripped rising costs and helped to keep margins and cash balances healthy.
“And the group’s optimisation strategy, which prioritises closing smaller stores and focusing on bigger ones in prime locations, is playing its part too.
“Despite the stellar performance, it’s worth noting Inditex’s fashion has a relatively high price point compared to other high street fashion chains.
“If inflation remains sticky at the current high levels, Inditex could see consumers’ demand for the latest fashion take a back seat as the cost-of-living pressures mount.”