Inditex increases sales in Q2 as Zara prepares Paris mega-opening – WWD

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LONDON – Zara is set to enter Paris and open one of its largest stores in La Défense, emblem of parent company Inditex’s rapid rebound after COVID-19 closures and its bullish outlook for fiscal 2021 and into -of the.

On Wednesday, Inditex said second-quarter revenue, profits and cash hit “all-time highs,” beating pre-pandemic numbers, as demand continues to grow.

Inditex’s results contrast with those of the H&M Group, where growth was slower and sales remained well below 2019 levels in the third quarter ended August 31 as COVID-19 restrictions continue to wreak havoc .

Inditex said 99% of its stores are now open and that projects such as digital retail integration, fashion rollouts and Zara store openings in places like Paris; the City of London and Chengdu were on the right track.

“Our operational performance has steadily improved and we had historic highs in the second quarter,” said Pablo Isla, executive chairman of Inditex, on a call with analysts.

He said the Inditex open platform, an integrated inventory management system that links retail stores to their respective websites and helps customers buy or return items quickly and efficiently, was 95% complete.

Isla said platform integration was progressing and operating a single, streamlined inventory system had been “of great help” during the pandemic.

Going forward, Inditex said that a Zara app is under development that will generate a QR code allowing shoppers to identify themselves at Zara stores, pay digitally, and order, collect and return merchandise in store and in line.

Markets around the world, including Spain, UK, France, USA and Mexico, are participating in the first phase of this project.

Isla added that by the end of fiscal 2021, around 25% of all Inditex sales will have been online. Some analysts estimate that number could rise to 35-40% over the next five years, pitting Zara and its sister brands against online fast-fashion players such as Asos and Boohoo.

Revenue for the second quarter ended July 31 increased 51% to 6.99 billion euros compared to the corresponding period last year, and increased 7% compared to 2019 at a rate of constant changes. Net profit for the second quarter of 2021 reached 850 million euros, outperforming the previous record set in the corresponding period in 2019.

Pablo Isla
Courtesy photo

Inditex said momentum strengthened in the current quarter, with in-store and online sales up 9% between August 1 and September 9 compared to 2019. Compared to 2020, sales during this period of one month increased by 22% in constant currencies.

Inditex said store openings around the world and “all brand concepts,” including Stradivarius, Oysho and Pull & Bear, were picking up from the pandemic and fueling growth this year.

In the first six months to July 31, net sales reached 11.9 billion euros, 49% more than the same period last year. Sales at constant exchange rates increased 53 percent.

Online sales in constant currency increased 36% compared to the corresponding period last year and 137% compared to 2019.

Growth in retail space in the first half of the year was “in line” with management expectations. At the end of the six-month period, Inditex reported having 6,654 stores, having opened 92 new units in 27 markets around the world.

The company also slaughtered and reorganized its commercial real estate portfolio and closed or relocated 800 stores depending on demand. In La Défense, for example, Inditex plans to expand and relocate Pull & Bear, and to open a Bershka, on two former Zara sites.

Zara’s new flagship, slated to open in early October, will include Zara Home. Covering an area of ​​nearly 54,000 square feet, it will be located in the Westfield Les 4 Temps shopping center and will be one of the largest stores in the Inditex portfolio.

Other Zara stores are expected to open later this year in the City of London; Corso Buenos Aires in Milan; Chengdu Taikoo Li in China and Cape Town Waterfront in South Africa.

Results growth is also on the rise: in the first half of the year, EBITDA increased 109% to 3.1 billion euros, while EBIT reached 1.7 billion euros. This compares to an EBIT loss of 198 million in the first half of 2020.

The net result for the first half was 1.3 billion euros, compared to a loss of 195 million euros in the first half of last year.

H&M x Brock Collection: Pictures

A look from the Brock Collection x H&M collaboration.
Courtesy

Inditex said net cash increased 24% to 8 billion euros – a historic high – in the first six months, due to “operating performance and effective management of working capital” .

The execution of the 2020-22 investment plan, with 1 billion euros devoted to digitization, and 1.7 billion euros for the integrated store and the online platform, is progressing at a good pace, confirmed the ‘business.

Harry Barnick, senior analyst at Third Bridge, a global research firm, said Inditex is emerging as “one of the early winners” in the post-COVID-19 retail world.

He argued that the company enjoys relatively modest inventory levels as it was able to reduce orders from suppliers during the pandemic and avoid steep discounts.

Barnick added that the Inditex Group’s “advanced and competitive online channel” has also been a driver of success and will give it an edge in the months to come.

Jefferies said second quarter results prove that “the fashion is all the rage again” and that Inditex’s impressive EBIT growth from 2019 “confirms the group’s ability to capitalize on a recovery in demand for fashion and workwear. It’s no surprise that the company’s tone on its outlook for fall 2021 is noticeably optimistic. “

Going forward, Zara Man is set to launch a sportswear line that will be available online and in select stores starting September 30. The collection is called Zara Athleticz and is based on simplicity, comfort and functionality.

Inditex also plans to integrate its premium and avant-garde brand Uterqüe into Massimo Dutti over the next year. The company said Uterqüe’s full line of products will be available online and at select Massimo Dutti stores.

The goal, said Inditex, is to optimize the “long-standing Massimo Dutti presence in markets such as the United States, Canada, Mexico and Turkey ”, and give Uterqüe exposure in markets where there were no stand-alone stores, such as the United Kingdom

The H&M group, which also released its results on Wednesday, had a harder time ignoring the impact of the pandemic.

The owner of brands such as H&M, Cos and Arket said on Wednesday that sales in reported terms rose 9% to SEK 55.59 billion, or $ 6.47 billion on the current stock exchange, which is lower analysts’ forecasts.

The company said sales in local currencies had returned to pre-pandemic levels in all markets except Asia and Oceania, and cited a “strong recovery” and “more than full price sales and good cost control “.

The company added that as the restrictions were relaxed, “in-store sales increased in many markets while online sales continued to increase.”

Nonetheless, the lockdowns and restrictions continued to hurt the business. Compared to the same period in 2019, in published terms, H&M sales in the third quarter were down 11.2%.

The results followed stronger than expected gains for the second quarter, when H&M sales rose 75% in local currencies compared to the same period last year, when restrictions were at their peak over many markets.

H&M plans to reveal more detailed numbers for the first nine months of its fiscal year on September 30.

Inditex shares closed down 1.7% at 29.68 euros on Wednesday, while H&M shares fell 3.1% to SEK 169.56, or $ 19.75.


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