Zara owner Inditex booked its first loss since it went public in 2001 as the coronavirus crisis forced it to shut most shops but its shares rose after it unveiled a €2.7 billion plan to accelerate its focus on large stores and online sales.
Inditex, the cash-rich owner of fashion brands such as Massimo Dutti and Bershka, said the rapid drop in sales had slowed, with sales at constant currencies falling 34 per cent in the June 2nd-8th period over a year earlier, versus a 51 per cent slide in May.
Despite tumbling sales, inventories still fell by the end of the February to April first quarter compared with a year ago, underscoring Inditex’s ability to respond to demand.
“Impressively – especially in the current environment and testament to the strong business model – inventories were actually down 10 per cent at the end of the quarter,” JP Morgan wrote.
Shares in Inditex, which said it would pay a €0.35 dividend for 2019, rose 1.2 per cent.
Shop sales in Asian countries, such as China and Korea, were reaching the same levels as last year, Inditex chairman Pablo Isla told a conference call.
Inditex, the world’s largest fashion retailer, booked a net loss of €409 million after sales tumbled to €3.3 billion, down from €5.9 billion in the same period a year earlier.
Clothes retailers from H&M to Gap have reported a sharp drop in sales as shoppers hunkered down at home during global lockdowns to halt the spread of coronavirus. H&M warned it would make its first quarterly loss in decades in the March to May period.
Inditex’s quarterly loss included a €308 million provision to close up to 1,200 smaller outlets in 2020 and 2021, part of its shift to bigger units.
It said it would spend an extra €2.7 billion overall to upgrade technology at stores and to drive its online sales so that they made up a quarter of sales by 2022, compared with 14 per cent now. Online sales surged 95 per cent in the lockdown in April. – Reuters
