PARIS – Zara owner Inditex is off to a strong start for summer.
The Spanish fast-fashion giant reported sales rose 11.5 percent in constant currency between May 1 and June 1, giving the company a strong start to the second quarter as shoppers snap up its latest collections.
The update came alongside first-quarter results that were slightly ahead of expectations. Sales in the three months to April 30 were up 8.8 percent at constant currency to 8.75 billion euros. That exceeded analyst expectations, which had been expecting growth closer to 8 percent.
The bigger surprise came from profitability. Gross margin reached 61.2 percent, up 67 basis points from a year ago and ahead of analyst forecasts.
That matters because much of the fashion industry is struggling to find growth at both ends of the market as consumers grapple with economic headwinds and political instability.
Luxury giant LVMH reported 1 percent organic growth in its latest quarter, while Swedish rival H&M saw first-quarter sales slip 1 percent in local currencies as it continued to close and revamp stores.
Inditex, which is also undergoing a program of closing and optimizing existing stores, seems to keep shoppers interested with a string of high-profile projects including the recently-released Bad Bunny collaboration and an upcoming John Galliano project.
The company also continues to benefit from a supply chain that allows it to react faster than many rivals. Because much of its production is located relatively close to its main markets, Inditex can reorder popular products and adjust collections during the season.
Gross profit rose 6.9 percent to 5.4 billion euros, while EBITDA increased 7.3 percent to 2.6 billion euros. Net income rose 5.4 percent to 1.4 billion euros.
Inventory increased just 1 percent from a year earlier, suggesting the company entered the summer season without a major stock excess and little incentive to discount as it continues its full-price strategy.
Inditex also finished the quarter with a net cash position of 10.8 billion euros, giving it plenty of room to keep investing in stores, logistics and technology, as it expects to implement a plan to expand and upgrade its retail footprint.
The group operated 5,456 stores at the end of April and said it expects gross selling space to grow by around 5 percent this year.
Overall, the company reduced store numbers at all its concepts, including flagship Zara, with the exception of its newest concept Lefties, which started as an off-price retailer for leftover stock and has since expanded and added eight stores this quarter.
“Lefties represents one of the most interesting growth opportunities within the Inditex portfolio. The brand is well positioned to attract younger families and more price-conscious shoppers who may find Zara increasingly expensive. Physical store expansion could help Inditex reach customers that its existing brands do not fully serve today,” said Third Bridge analyst Alex Wong.
The company also pointed to growing use of artificial intelligence across its operations, though like many retailers, it offered few details on exactly what that means in practice.
