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1Q Net sales at Inditex hit a new record of €5.93 billion

  • Net sales registered year-on-year growth of 5%. Net profit amounted to €734 million, 10% more than in the first quarter of 2018.
  • The company’s net cash position increased by 9% to €6.66 billion.
  • Inditex’s Chairman and CEO, Pablo Isla, said that these figures demonstrate “the solidity of the company’s model, whose profitability and cash flow generation continues to grow owing to the Group’s commitment to customer-driven quality fashion”. Mr. Isla also underscored the “strong momentum in the digital transformation of the integrated store and online sales platform and in sustainability as a key pillar of the company’s strategy”.
  • In this sense, Inditex has announced the launch of nine new online markets. In addition to going live with in Brazil during the first quarter, the Group has just inaugurated its online platform in Morocco, Egypt, Lebanon, Israel, Serbia, Indonesia, the United Arab Emirates and Saudi Arabia.
  • During the Autumn, Zara is planning to launch online sales in South Africa, Qatar, Kuwait, Bahrain, Oman, Jordan, Colombia, Philippines and Ukraine.
  • In April, the company distributed €32 million to 92,000 employeesas part of its extraordinary profit-sharing plan.
  • In-store and online sales increased by 9.5% in local currencies between May1st and June 7th. From February 1st until June 7th sales increased 6.5% in local currencies.

Key figures (€ million) (see press release

The Inditex Group registered net sales growth of 5% in the fi rst quarter of 2019 (1 February - 30 April) to reach a new record of €5.93 billion, driven by the ongoing digital transformation of its integrated store and online sales platform. Store and online sales increased by 9.5% in local currencies from May 1st until June 7th and from February 1st until June 7th sales increased 6.5% in local currencies.

Underpinned by sales growth in all geographies and at every brand, the Group’s solid operating performance lifted net profi t to €734 million, growth of 10% year-on-year.

Profi tability continued to grow in tandem, with the gross margin widening 61 basis points to 59.5%. In addition, the company’s net cash position increased by 9% to €6.66 billion Inditex’s fi rst-quarter fi nancial statements refl ect the fi rst-time application of IFRS 16. Excluding the eff ect of IFRS on leases from February 1st, EBITDA grew 9%, EBIT 7% and Net profi t 7%.

Inditex’s Chairman and CEO, Pablo Isla, said that these fi gures demonstrate once again “the solidity of the company’s model, whose profi tability and cash flow generation continues to grow owing to the Group’s commitment to customer-driven quality fashion”.

Mr. Isla also underscored the “strong momentum in the digital transformation of the integrated store and online sales platform”, whose reach was extended this quarter to signifi cant markets such as Brazil, Israel, the United Arab Emirates, Indonesia and Morocco, “and in sustainability as a key pillar of the company’s strategy”.

Inditex is holding its Annual General Meeting in Arteixo (La Coruña, Spain) on 16 July. The Board of Directors will ask the company’s shareholders to approve the payment of an overall dividend from 2018 profi ts of €0.88 per share, €0.44 of which was already paid out on 2 May; the balance would be paid on 4 November 2019.

The dividend motion is aligned with the Group’s new payout policy, which the Board of Directors has proposed increasing from 50% to 60%. It also includes the portion of the bonus dividend of €1 which the Group is proposing to distribute against 2018, 2019 and 2020 profi ts.

Online sales launched in 9 new markets

The fi rst part of the year was particularly intense in terms of the Group’s digital transformation policy with signifi cant developments in the expansion of the integrated platform. So far this year, Zara has launched its integrated store and online platform in Brazil, Morocco, Egypt, Lebanon, Indonesia, Israel, Serbia, the United Arab Emirates and Saudi Arabia. Uterqüe, meanwhile, launched its online platform in Mexico, one of its most important markets.

In parallel, Pull&Bear inaugurated its online store in the US and six of the Group’s chains opened their worldwide online stores. Specifically, Massimo Dutti, Pull&Bear, Stradivarius, Zara Home, Oysho and Uterqüe have added more than 100 new markets where customers can now purchase their latest collections online. During the autumnwinter season, Zara is planning to launch online sales in South Africa, Qatar, Kuwait, Bahrain, Oman, Jordan, Colombia, the Philippines and Ukraine.

During the first quarter, the Group also continued to open new stores in 23 different markets, and also the process of expanding, refurbishing and absorbing stores, as part of the process of differentiating its sales footprint. Among the stores worth highlighting is the Zara store opened in Hudson Yards in New York (US), one of the world’s highest-profile retail developments, as well as the stores newly opened on Rue Jean de Rouiffe, in Cannes (France) and more recently in the Time World Mall, in Daejeon (South Korea).

Massimo Dutti also opened high-profile stores, like the one on calle Vara de Rey, in Ibiza, which stands out for its Scan&Shop technology and its Click&Collect service. That store also features the new Style Advisor and Express Alterations services, with same-day collection or delivery in three hours.

Massimo Dutti also opened a new store in the Manama shopping centre in Bahrain and flagship stores in Seoul (Korea) and Vladivostok (Russia), in the Kalina Mall, which also welcomed Bershka, Stradivarius, Oysho, Pull&Bear and Zara Home stores during the quarter. Oysho made its début in Latvia and Singapore and opened a huge flagship store, spanning over 2,200 square metres, in Mallorca, on the emblematic Paseo del Born, while Stradivarius opened its doors on France’s Cote d’Azur, specifically in Cagnes-Sur-Mer, and Zara Home opened its maiden store in Bulgaria.

All of these new stores are fitted with the latest customeroriented technology and all of the breakthroughs on the eco-efficiency front, bringing the store count meeting the Group’s green criteria to 90% of the total, in line with its commitment to making the platform fully sustainable by 2020.

In addition, the logistics connection hub in Lelystad (Netherlands), which has begun to operate, featuring from the outset all of the sustainability characteristics prescribed for the Group’s central facilities.

Creation of a Sustainability Committee within the Board of Directors

In line with its total commitment to sustainability, the Group has decided to set up a specific Sustainability Committee within the Board of Directors, whose mission is to oversee the sustainability strategy and policies; supervise the supply chain monitoring effort and the relationship with the various stakeholders with a vested interest in sustainability and with the CSR Board; verify compliance with the Group’s health and safety and human rights standards all along the value chain and with the sustainability information reporting process; and any other issue or initiative that impacts or could impact the company’s sustainability.

In fact, the Group carried out important strategic initiatives related with its sustainability policy during the quarter. For example, Pablo Isla signed a €3.5 million agreement with the Massachusetts Institute of Technologies (MIT) covering the promotion of sustainability-driven research, including new recycling techniques, among other aspects.

All of the brands’ spring/summer collections continue to show considerable growth in the volume of garments featuring the Join Life label, which distinguishes and promotes excellence in terms of the most environmentally-friendly production processes, particularly related to the use of water and the choice of recyclable, sustainable and/or organic raw materials.

In parallel, the store platform continues along its roadmap towards achieving full eco-efficiency by 2020. The latest flagship store to receive Platinum LEED certification was the Uterqüe store in Madrid, thanks to its rational use of water, energy savings and the use of recycled materials during its construction.

On the environmental front, the Group continues to champion a plethora of initiatives, notably including - on account of their visibility - the new reusable Zara bags made from recycled paper. In addition, it continued to extend the Closing the Loop programme for the collection of used clothing for recovery, reuse or recycling by the third sector organisations Inditex collaborates with: containers have now been installed in 1,440 stores in 25 markets.

Employee profit-sharing plan

In April, the company distributed €32 million to around 92,000 employees with at least two years’ service in its stores, manufacturing facilities, logistics platforms, chains and subsidiaries as part of phase two of its 2018-2019 extraordinary employee profit-sharing plan. This plan envisages the payout of 10% of the annual growth in net profit, which yielded a figure of €7 million in 2018, a number the Group topped up by a further €25 million. In total, Inditex has distributed €153 million to its employees since it introduced this profit-sharing scheme.

Commercial initiatives

All of the brands worked hard to introduce new commercial initiatives which add to their customers’ experience. Thanks to this combination of fashion and experience, Zara was named the top Spanish brand by Brand Finance during the first quarter.

As part of the bicentennial celebrations at the Prado Museum (Madrid, Spain), Zara Man created a special collection called ‘Becoming a work of art’, featuring clothing inspired by some of this renowned gallery’s most famous works of art.

Zara also launched its second exclusive and limited Zara SRPLS edition and, in May, announced a new collaboration with the Chelsea College of Arts for new unique collection designed by the school’s brightest young students under the scope of the Zara VIEW.S initiative, already in its third iteration.

Zara featured, along with Zara Home, Oysho and Massimo Dutti, at the Milan Furniture Fair, one of the most prestigious events in the international design lineup. At its refurbished global flagship store on Corso Vittorio Emanuele, the brand showcased its strategic commitment to both technology and sustainability, providing an innovative vision of the materials comprising the Join Life collections, singled out for their excellence in terms of productive processes and raw material choices. A raincoat from the Recycled Join Life capsule collection lay at the heart of an installation created involving over 20,000 parts made from recycled materials.

As is customary, the first quarter was shaped by the presentation of the various’ brands spring/summer collections. SS19 ‘By Numbers’ was the slogan chosen by Massimo Dutti to present its collection in an evocative atmosphere inspired by the African Savannah. The photographer was Lachlan Baley and the creative director, Franck Durand.

Pull&Bear put the first range of clothes from the Primavera Sound Pull&Bear capsule collection on sale on both the brand’s app and website and in select stores. This is a sustainable collection which combines fashion and music and takes its inspiration from international streetwear and urban culture, two of the worlds that have consistently embraced music as their hallmark. The majority of the collection carries the Join Life label.

Bershka filled its shop windows and collections with colour and imagination for its fun Pantone collection, offering a limited series of monochromatic pieces for the new season. The youth brand continued to revamp its store image in parallel, drawing from the world of music, concerts and backstage scenes, which is translating into a more industrial and lighter feel, with open ceilings that reveal the stores’ bones.

To mark Women’s Day, Stradivarius exhibited the testimony of 12 women it invited to identify and share their ‘super powers’ and the women they admire the most. This brand also ran the fifth edition of The Summer Expedition during the quarter, this time with Mexico’s Pacific Coast as the backdrop: nine international influencers were invited there to learn about the latest Stradivarius trends, all watched by over 30 million followers worldwide on the exclusive Youtube channel, The Fashion Reality, created by Stradivarius.

Oysho_Sport presented Oysho Sport Team, its international team of sports ambassadors with leading track records in disciplines such as boxing, cycling, swimming, karate, cross fitness, running and water sports.

Joana Pastrana, three-times IBF world champion and National Sports Prizewinner in 2018, Garazi Sánchez, Spanish surf champion and Sandra Sánchez, now leading in the career of ‘the best of the best’ in the karate premier league, are just a few of the athletes populating the Oysho Sport Team. Oysho_Sport embodies Oysho’s strategic commitment to the world of sport and to evolving its sportswear in terms of technical performance and innovation.

During the first quarter, Zara Home launched an initiative targeted at interior design professionals covering all of the products featured in the brand’s catalogue as well as pieces that can be tailored, personalised and/ or made to order. The Zara Home Business service extends to the provision of advice on choice of product, image or look and includes exclusive discounts for highvolume orders placed by professional customers.

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