Profits slide at Inditex as Covid-19 shutters stores

Annual profits have tumbled at Spanish fashion giant Inditex, after the Covid-19 pandemic shuttered its stores worldwide.

The owner of Zara, Pull & Bear and Massimo Dutti, among others, said net sales in the 12 months to 31 January 2021 were €20.4bn, a 28% slide on the previous year. Earnings before interest, tax, depreciation and amortisation fell 40% at €4.6bn, while net income tumbled 70% to €1.1bn.

Online performed better, with Zara launching in 25 markets and sales rising 77% to €6.6bn.

But the retailer conceded that overall, the full-year performance had been "materially impacted" by Covid-19. As at 31 January, 30% of its store portfolio was closed and 52% had restrictions. Trading hours were down 25.5% in 2020 compared to 2019, with total store and online sales off 24.5% on a constant currency basis.

Inditex struck a more upbeat note looking forward, however.

It said its spring/summer collections had been well received and all its stores were now expected to re-open by 12 April. In the week to 7 March, sales were down 4% year-on-year, but excluding the five most relevant markets still in lockdown, which includes the UK, sales grew 2%.

Executive chairman Pablo Isla said: "Inditex has emerged stronger after such a challenging year.

"The digital transformation initiated in 2012, which is built around the integrated store and online sales platform, has proven to the right strategy.

"Inditex as a company is stronger today than it was two years ago, with a unique business model and a global, flexible, digitally integrated and sustainable sales platform, which places us in an excellent position for the future."

Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said: "Inditex has managed to deliver a sophisticated integration of physical and virtual stores, which has been crucial in boosting profitability. It has a tight supply chain, so it can react quickly to fickle fashion tastes without tying up lots of money in excess stock.

"The fact [it] managed to ring up more than €20bn in net sales is no mean feat. With all doors expected to be flung open in April, it will be all systems go, with the brands expected to get another lift from shoppers desperate for a real retail experience once more."