- The parent company of Zara brand has managed to turn around the impact caused by the Covid-19 pandemic, generating a net profit of €671million in the nine months of FY20, €866 million in the third quarter. Despite 5% of the stores closed in 3Q and ongoing trading restrictions affecting 88% of the store network, the sales trend has continued to improve: sales declined by 14% (10% in cunstant currencies) in 3Q20, compared to reductions of 31% in 2Q20 and 44% in 1Q20.
- Growth in online sales remains strong, with 75% growth in constant currencies in the first nine months of the year, and 76% in the third quarter.
- Operating expenses fell 17% year-on-year in 9M20.
- The strong cash generation during the 3Q drove growth of 7% in the Group’s net cash position, to €8.3 billion, a historic high
Inditex Group reported sales of €14.1 billion in the first nine months of its fiscal 2020 (1 February to 31 October), compared to €19.8 billion the same period in fiscal year 19. The third quarter (1 August to 31 October) registered the evident sales improvement shown since March, with sales of €6.1 billion, compared to €7 billion in 3Q19, a year-on-year decline of 14% (10% in constant currencies) after reductions of 31% in 2Q20 and 44% in 1Q20.
During the third quarter, 5% of the Group’s stores remained closed and 88% continued to face significant limitations in terms of space, trading hours or capacity. Against that backdrop, sales in local currencies between 1 and 18 October reached the record levels recorded in the same period of 2019.
In November, as second waves of Covid-19 hit many countries, 21% of the Group’s stores were forced to close; as of today, 8% remain temporarily closed, with another 10% required to close at the weekend. A significant number of stores continue to face meaningful restrictions on capacity, space usage and trading hours.
Despite these limitations, sales in local currencies in November 2020 amounted to 81% of November 2019 levels, a figure that has risen to 87% from December 1st to 10th.
Online sales have remained very strong throughout, registering a growth of 75% in constant currencies in 9M20 and 76% in 3Q20.
During the first nine months, gross margin remained at 58.0% of sales in 9M20, compared to 58.2% in 9M19 due to the execution of the business model. In local currencies, the gross margin expanded by 110 basis points to 59.3%.
The Group’s strong performance at the gross margin level also comes from the efficient inventory management. Inventory position declined by 11% year-on-year. Elsewhere, active management of operating expenses drove a year-on-year decline of 17%.
EBITDA amounted to €3.3 billion in 9M20, while EBIT stood at €946 million – following the fact the Group recognised a provision for the digital store integration programme in the first quarter.
Net profit for 9M20 amounted to €671 million. Note that this figure similarly includes the first-quarter provision. In the third quarter alone, the Group recorded a net profit of €866 million.
The strong cash generation during the third quarter had a direct positive impact on the net cash position, which was bolstered by 7% to reach a historic level of €8.3 billion at the October close.
In light of these figures, Inditex’s Executive Chairman, Pablo Isla, noted that these “are the direct consequence of an effective management in every area of the Company, with a seamless coordination between each link in the business model: design, product, manufacturing, logistics, stores and online. They are also evidence of the Group’s ability to react and adapt continuously in an unpredictable environment and its unwavering commitment to offer unbeatable product quality and service offer“.