Zara's parent company Inditex records 70 per cent drop in profit

Inditex, the group behind Zara, Bershka and more, recorded more than 25 per cent less in turnover last year. Net profit even plummeted by 70 per cent. It seems online growth does not yet outweigh the closed doors.

Third of all turnover

During the past Covid year, which for Inditex ran from the end of January 2020 to February 2021, the Spanish fashion giant behind big chains such as Zara, Massimo Dutti and Stradivarius achieved a net profit of 1.1 billion euros. It was a 70 per cent drop, while sales fell by 28 per cent due to the mandatory store closures caused by the pandemic. Total sales reached 20.4 billion euros.

Online sales increased by 77 per cent to 6.6 billion euros, which, according to Inditex, makes the company a leading player in the field of online fashion. Meanwhile, e-commerce accounts for a third of total sales, which is, in fact, two years ahead of schedule: Inditex hoped to reach a quarter of its revenues to be made online by 2022. Yet, that achievement proved not to be enough to compensate for the loss in sales from the physical stores. Nevertheless, the company notes that it maintained a “robust” margin of 55.8 per cent and, on top of that, has a comfortable cash position.

Inventory system highlight of the year

In the current quarter, store closures continue to outweigh online growth. Sales fell by 15 per cent in February and by 4 per cent in the first week of March in local currency. This week, 15 per cent of stores were still closed due to the Covid restrictions. Excluding those closed markets, however, sales rose 2 per cent in the first week of March, Isla stressed. Operating profit from the fourth quarter came in at about 30 per cent below the estimates of analysts.

Nevertheless, according to CEO Pablo Isla, one “of the highlights of the year” was the introduction of the integrated inventory management system (SINT), which allows employees to prepare online orders directly from the physical stores. Today, the system is available in 5,777 stores across 89 markets, enabling Inditex to handle 1.16 billion euros worth of orders from its stores.