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Spanish fashion giant Inditex reached a new record turnover in the first half of 2018, breaking the 12 billion euro limit for the first time. Profit too rose to a record high, but estimates for the second half of the year differ greatly.
12 billion euro turnover mark reached
“The strong first-half results are the result of a solid sales and operating performance, arising from the unique strength of the Group’s integrated and sustainable business model”, said chairman and CEO Pablo Isla. The fashion group indeed reached the 12 billion euro turnover mark for the first time as sales increased by 3 % to 12.03 billion euro. Net profit reached a record as well, at 1.4 billion euros (also +3 %).
Inditex, which opened new stores in 44 countries in the period up to 31 July, elevated its gross profit margin ever so slightly: from 56.4 % to 56.7 %. On a comparable basis, the fashion holding company grew 4 % thanks to growth in all markets. In the second half of the year, the company expects growth to accelerate as expectations for the autumn collections are high: turnover could increase by 6 % in the period from August and early September and the CEO thinks this line will continue.
Handicap of a head start
However, analysts like Bloomberg author Andrea Felsted do not share that optimism: in the first half of the year, turnover growth was at its lowest level in four years and organic growth (+4 %) was well below the same period last year (+ 6%). Although the fast-fashion pioneer is ahead of his peers in the sector, the competition seems to be catching up. The pressure from price fighters (Primark) and large online players is doing its part, while the strong euro is also a handicap: the company produces a large part of its clothes in Europe, but half of its turnover comes from outside the eurozone.
Today Inditex has 7.422 stores in 96 countries and is active online in 49 of these markets, although this number will grow rapidly given Isla’s ambition to be available online everywhere by 2020 – including countries where there are no physical points of sale (yet)./p>
