Inditex shares take a hit after increasing worker’s wages

Inditex's shares dropped by as much as 4.7% on Friday after the fast-fashion retailer agreed to give Spanish shop workers a 20% rise in wages.

CCOO and UGT, Spain's largest worker unions, announced the pay increase last week. UGT said salaries are set to rise by as much as 40% in some parts of the country due to rising inflation.

Wage increases will cost Inditex approximately £148 million (€167 million) a year, or about 9.7% of its operating costs, Bankinter noted.

The new increase means Inditex will pay a minimum wage of £1,320 (€1,500) a month to shop assistants, who will also receive monthly sales commissions and annual incentives. Employees with greater responsibilities will earn a minimum of £1,808 (€2,041).

Inditex owns eight brands in Spain including Zara, Massimo Dutti, Pull & Bear, and Bershka. The company employs 165,000 people in 177 countries, a third of which are based in Spain.

UGT Union Leader, Alvaro Cajigal, commented: "Wages for Inditex shop workers were very low in some places in Spain… We hope it will set a precedent for other retail chains."

Data from the National Statistics Institute showed consumer prices rose 5.8% year-on-year in December, whilst average annual inflation was 8.4%, which is the highest it has spiked since 1986.

Inditex has already set itself apart from some rivals by passing on a larger chunk of rising costs, and analysts expect it to continue raising prices. However, pay rises without triggering further inflation could prove tricky for businesses.

It is speculated that this move will pressure other fashion retailers to follow suit in order to retain young talent in challenging labour markets. For example, H&M announced a £443 (€500) bonus for 4,000 shop workers in Spain and Portugal in December after Inditex offered £886 (€1,000) to its workers in the same region.

This follows the news that Inditex has committed to doubling the number of employees with disabilities by 2025. It is endorsing the ILO Global Business and Disability Network, a unique worldwide network created to promote disability inclusion in the workplace.