Inditex’s profits are a model for fashion rivals

Inditex has recovered from a slow summer start, resulting in a record-breaking profit for the first six months of the year.

Zara’s Spanish owner reported sales of £18.1 billion for the six-month period ending in July. This is up 7.2% from the same time in 2023. The pre-tax profit rose more than 10.6 percent to £3.6 billion despite a slowdown in price increases.

Inditex’s autumn-winter collection was “very well received” by customers, with sales up 11 percent between August 1 to September 8.

While some competitors struggle with rising costs, and consumers continue to slow down their spending, the “solid” performance is a welcome relief. Unseasonable temperatures across Europe in June kept many shoppers away from the stores, leaving retailers with unsold inventory.

Primark’s summer sales were affected by the wet weather in Britain. H&M, another Swedish competitor, also cited it as a reason for their poorer performance. In Spain, where Inditex accounts for 15% of its sales, the June rainfall was 50% above average. Xavier Brun of Trea Asset Management in Spain said that the tight control of the group over its supply chain gave it a “greater ability to react to seasonality”.

Inditex has opened new warehouses to compete with online fast fashion brands like Temu and Shein. They have also invested in logistics so that new lines can be brought into stores faster. Zara Streaming is a new video platform that allows live shopping broadcasts in several markets, including Spain, Germany, and Britain. In the second quarter, womenswear prices fell by 6 percent on an annual basis.

Inditex has reported a strong growth in Europe and Spain in particular. The group’s performance in the United States was lower, which is a crucial area as the group plans to expand.

Zara’s biggest brand saw sales rise by 5.4 percent to £13.03bn in the last six months. Bershka is a brand aimed at young people. It reported revenue of £1.38billion, an increase by 16.7 percent.

Inditex, founded by Amancio, now 88 and one of the richest men in the world, was originally a family-run business. It is based in Galicia (northwest Spain) and has over 5,600 stores. It also owns Massimo Dutti and Oysho.

Inditex plans to launch Zara’s pre-owned platform by the end October in America. The site for donation and resale is currently available in 16 different countries. The Spanish fashion group is investing €1.8billion in 2024-25 to improve its logistic capabilities. Zaragoza in Spain will host one of the new logistic centres, which is scheduled to open by May or June 2025.

Inditex’s 48-year-old chief executive, Oscar Garcia Maceiras said that the model of the group “continues” to provide opportunities for profitable growth in all regions, concepts and channels.

Nicolas Champ, a Barclays analyst, stated that the retailer had returned to “normal” business after experiencing softer sales in the early summer. He said that despite the fact that sales geographical breakdown shows a lower demand in Asia during the first half of the year, this was more than offset due to a resilient performance in Europe.

Inditex shares, which rose by 34% in the last year, gained another €2.10 or 4.5 percent to €48.38 at Madrid.