Zara owner Inditex reports strong holiday sales and lifts margin outlook

By Corina Pons and Helen Reid

MADRID (Reuters) -Zara proprietor Inditex (BME:) reported sturdy vacation season buying and selling with gross sales up 14% within the six weeks to Dec. 11 and raised its margin outlook for the 12 months, serving to push its shares to an all-time excessive on Wednesday.

The world’s greatest vogue retailer reported a internet revenue of 4.1 billion euros ($4.42 billion) for the nine-month interval to end-October, up 32.5% from a 12 months earlier. Gross sales in shops and on-line gained 11%, slower than the 19% progress seen a 12 months earlier.

The corporate behind Zara and different manufacturers is reducing retailer numbers and investing in bigger, extra engaging shops, in addition to bettering its logistics to ship on-line orders sooner than rivals.

Thanks to those modifications, Inditex now sees its 2023 revenue margin gaining 75 foundation factors, having beforehand guided to a steady gross margin.

“They’re in an excellent place and so they proceed to realize sturdy market share,” mentioned Alistair Wittet, portfolio supervisor at Comgest in Paris, which holds Inditex shares.

The gross margin enhance places profitability again up at ranges not seen since 2015, Wittet mentioned, including that Inditex is managing to promote extra garments at full worth.

Inditex shares have been up 1.6% by 0900 GMT.

With fast-growing finances vogue retailer Shein taking share on the cheaper finish of the market, Zara has sought to draw extra discerning buyers and provided costlier clothes, a technique Swedish rival H&M (ST:) is attempting to emulate.

In an indication of the market’s confidence, Inditex’s valuation has not too long ago overtaken H&M. Inditex shares are buying and selling at round 21 occasions anticipated earnings, whereas H&M’s price-to-earnings ratio is nineteen.

Inditex’s third-quarter gross sales progress for August-October did sluggish, although, to 7%, down from 16% progress within the second quarter. Unseasonably heat climate might have affected gross sales in a number of markets, mentioned Patricia Cifuentes, senior analyst on the securities division of Spanish fund supervisor Bestinver.

Inditex additionally sees forex impacts from a stronger euro denting gross sales by 4% this 12 months, up from 3.5% beforehand anticipated.

Whereas reducing total retailer numbers, Zara plans to open extra shops in the US, its second-biggest market, and the group is investing in new checkout and safety applied sciences to halve the time it takes prospects to pay in-store.

“The corporate is enhancing its capability to ship on-line orders in a short time and its capability to place in shops what shoppers need most,” mentioned José Ramon Iturriaga, fund supervisor at Abante Advisors, which holds Inditex shares.

CEO Oscar Garcia Maceiras informed analysts the enterprise was working nicely within the U.S. market and Inditex continued to see “vital alternatives” for progress there.

Inditex’s outcomes got here a day after it was pressured to tug a marketing campaign by Zara which triggered requires a boycott after some noticed the imagery of statues wrapped in white as evoking corpses in shrouds in Gaza.

Because it seeks to spice up gross sales in China, Inditex mentioned it not too long ago launched a weekly five-hour “livestream expertise” on Chinese language social media platform Douyin displaying prospects footage of catwalks. The livestream will quickly be accessible in different markets, Inditex mentioned.

($1 = 0.9276 euros)