The Galician fashion multinational earns 760 million with a turnover of 6,742 million in the first quarter
The Galician multinational Inditex increased sales by 36% in the first quarter of the year to 6,742 million euros, with some net profit which grew by 80% to 760 million euros. The profit would have reached 940 million euros, but the management of the group chaired by Marta Ortega and whose CEO is Oscar Garcia Maceirasdecided to provision the expenses caused by the store closings in Russia and Ukraine. The operating result (ebitda) grew by 55% to 1,917 million euros but the fashion firm “has decided to fully provision the estimated expenses for the 2022 financial year in the Russian Federation and Ukraine”, which represents an extraordinary charge of 216 millions of euros. Pre-tax profit rose 82% to €990 million. Store and online sales at constant exchange rates between May 1 and June 5, 2022 have grown by 17% over the record period of 2021 (+13% in the last two weeks over the same period of 2021) . Currently 90% of stores are open.
The online sale At a constant exchange rate, it was 6% lower in the first three months of the fiscal year, after the 67% growth registered in the first quarter of last year. In any case, Inditex expects online sales to exceed 30% of total sales in 2024, somewhat lower than the level reached by other fashion multinationals.
Inditex reiterates that “it continues with the global expansion of its integrated business model with three strategic priorities: full store and online integration, digitization and sustainability”. In this sense, it is worth noting that the period was marked by a strong growth in traffic in Inditex stores, in all geographical areas and with special emphasis on the US. The gross margin grew by 37% to 4,054 million euros. Gross margin reached 60.1% (+20 bps over 1Q2021), the highest in 10 years. This indicator is one of the ones that has most concerned Inditex management in recent months, given the difficulties of supply chains. Operating expenses grew 24%, below sales growth.
The board of directors of Inditex will propose to the general meeting of shareholders the approval of a dividend of 0.93 euros per share charged to the results of the 2021 financial year. This dividend is made up of two equal payments of 0.465 euros per share: the first has already been made on May 2, 2022 and the second will be made on May 2, November 2022. In March, the board of directors also proposed an extraordinary dividend of 0.40 euros per share to be paid in relation to the 2022 financial year.
One of the challenges for the management of the company in the coming months is the strategy to follow in the face of the growth of native digital firms such as Shein. The Chinese has managed to surpass the Galician multinational in one of its elements that made it especially powerful, the rapid control of market trends. The Chinese prides itself on instantly detecting what is fashionable and consumer tastes, and reacting more quickly to its physical proximity to the points of production.
The opening of a temporary physical store in Madrid by Shein has shown the commercial battle that is coming in the coming months, which forces Inditex to delve into higher value-added market segments.