Inditex turns around pandemic impact with €866m Q3 net profit

Zara parent Inditex says it has "managed to turn around the impact caused by the Covid-19 pandemic" by delivering a net profit of €671m in the nine months of FY20 and €866m in the third quarter.

Despite 5% of the Spanish group's stores closed in Q3 and ongoing trading restrictions affecting 88% of the store network, it said that its sales trend had also continued to improve. Sales declined by 14% (10% in constant currencies) in Q3, compared to reductions of 31% in Q2 and 44% in Q1.

The group, whose brands also include Massimo Dutti, Berska, Pull & Bear and Stradivarius, reported sales of €14.1bn in the first nine months of its fiscal 2020 (1 February to 31 October), compared to €19.8bn the same period in fiscal year 2019.

The third quarter (1 August to 31 October) registered the "evident sales improvement" shown since March, with sales of €6.1bn, compared to €7bn in Q3 2019, a year-on-year decline of 14%.

Online sales have remained very strong throughout the year, registering a growth of 75% in constant currencies in the first nine months of 2020 and 76% in Q3.

In November, with 21% of the group’s stores closed with new restrictions on store opening capacity and trading hours, sales in local currencies were equivalent to 81% of the year-earlier volume, a figure that has risen to 87% from 1-10 December. As of today, 8% of the group’s stores remain closed, with an additional 10% having to close during the weekends.

Inditex executive chairman, Pablo Isla, said that “these results are the direct consequence of effective management in every area of the Company, with a seamless coordination between each link in the business model: design, product, manufacturing, logistics, stores and online. They are also evidence of the Group’s ability to react and adapt continuously in an unpredictable environment and its unwavering commitment to offering unbeatable product, quality and service.”

Despite the pandemic, the Group has been forging ahead with its "differentiated retail space and product offer", with high-profile openings in 25 markets during the nine-month period, including in China, Mexico, Russia, Germany, The Netherlands, Spain and Saudi Arabia. Zara online sales are already integrated with the local store network in 85 markets, complemented by online sales in 106 additional markets through Zara.com/ww. On 3 December, Zara.com launched in Panama and Puerto Rico, following launches in 12 new markets, including Chile, Costa Rica, Honduras and Tunisia, during 3Q. Lefties, its value fashion brand meanwhile, launched online in Spain and Portugal.

Earlier this month, Zara opened its new retail concept store in Bluewater in Kent. The 37,000 sq ft global flagship store is a model for its online and in-store integration concept include self-service and dedicated refund tills, an Automated Collection Point (ACP) and a dedicated personal shopper area.