Inditex, the parent company of Zara, has announced its return to profitability after facing significant challenges during the COVID-19 pandemic. In the second quarter, the company reported a net profit of €214 million, a major improvement compared to the €409 million loss in the previous quarter. However, for the first half of the year, Inditex still recorded a net loss of €195 million. It’s worth noting that this figure excludes a provision for its advanced store digitalization program, which means the company would have posted a profit of €39 million.

The company’s recovery was largely driven by strong growth in online sales, which saw a 74% increase in the first half of the year. At one point, Inditex received a record-breaking one million orders in a single day. Additionally, the company increased its net cash position by €734 million in the second quarter, bringing its total to €6.5 billion. Consolidated EBITDA for the first half reached €1.5 billion.

Despite experiencing a 31% drop in total sales in the second quarter (compared to a 44% drop in the first quarter), Inditex’s performance showed improvement. This recovery is particularly impressive considering that 87% of its stores were closed in May. Overall, group sales for the first half of the year amounted to €8 billion, a decline of 37%.

Currently, 98% of the company’s stores are open, and although there are still some restrictions in certain markets, Inditex’s recovery is continuing into the current quarter. Sales in local currencies between August 1st and September 6th were only 11% lower than the same period in 2019, despite the challenging circumstances. The company highlighted that while physical store sales are gradually recovering, online sales continue to grow at an impressive pace.

Throughout the first half of the year, Inditex effectively managed its business model to adapt to demand. The company maintained a strong gross margin of 56.2% of sales, compared to 56.8% in the previous year. Additionally, Inditex reduced inventory levels by 19% and controlled operating expenses, resulting in a 21% reduction.

Executive Chairman Pablo Isla praised the hard work and creativity of Inditex employees, emphasizing the critical importance of the company’s strategy to integrate physical stores with online sales. Inditex aims to have online sales account for more than 25% of its total turnover by 2022, up from 14% in 2019. As part of its digital focus, the company is upgrading its stores to incorporate more digital features while also closing smaller units and opening larger-format locations.

During the first half of the year, Inditex opened large-format stores in 14 markets and refurbished 72 stores, including expansions. This included prominent store openings and expansions in cities such as Moscow, Paris, Madrid, Berlin, New Delhi, Lisbon, and Amsterdam. In the second half of the year, the company has plans to open high-profile stores in Monaco, Beijing, Paris, London, and Doha, among others.

Inditex has also expanded its online platform to new markets. In the second quarter, the company launched online sales in Argentina, Uruguay, Paraguay, Peru, and Algeria. In the third quarter, Zara introduced online sales in Chile, North Macedonia, Montenegro, Tunisia, and Andorra. Furthermore, new online platforms in Nicaragua, Honduras, Costa Rica, and Guatemala are set to be launched on Wednesday.

Inditex’s strong recovery and focus on digitalization position the company well for the future, especially as online sales continue to gain prominence in the retail industry. With its strategic integration of physical stores and online channels, Inditex is adapting to evolving consumer demands and aims to further strengthen its position in the fashion market.

Useful links:
Inditex Official Website
Zara Official Website