Inditex reduces its profit by 13% in the third quarter and increases online by 75%

In this period, an average of 5% of the stores remained closed and there were restrictions in 88% of the group’s stores.

Inditex closes the third quarter of its fiscal year with a profit of 866 million euros, 13% less than a year before due to the closure of stores due to the coronavirus crisis, but its sales shot up 75% online, as reported by the company to the National Securities Market Commission (CNMV).

Sales in the third quarter (between August and October) were 6,052 million euros, 13% less compared to 7,000 million euros with which it closed in the same period of the previous year. Sales at constant exchange rates decreased 10%.

“The results for the third quarter (August-October) show a strong recovery in operations, although they have been materially affected by the health situation, with the temporary closure of stores and restrictions on their operation,” they point out from the company.

Thus, to minimize the impact, the owner of Zara has actively managed its supply chain, unique inventory and operating expenses. The initial fall / winter collections were very well received by our clients.

Most of the stores reopened at the end of July, but with capacity and time restrictions. In the third quarter an average of 5% of the stores remained closed and there were restrictions in 88% of the Group’s stores. In a somewhat more normalized environment, store sales began a strong recovery. Online sales at constant exchange rates continued to grow at a remarkable 76%.

Nine months

Inditex closed the first nine months of its fiscal year with a net profit of 671 million, a figure much lower than the 2,720 million euros registered in the same period of the previous year (75.3% less), but that returns to profits after the losses of 195 million euros at the end of the first semester.

The results “are a direct consequence of a very efficient management in all areas of the company, with a precise coordination of all the stages of our model: design, product, manufacturing, logistics, stores and online“, Points out Pablo Isla, president of Inditex.

Sales for the first nine months were 14,085 million euros (19,820 million euros until October 2019). Sales at constant exchange rates decreased 26.9%.

The net financial position as of October 31, 2020 increased by 7% to 8,265 million euros, reaching an all-time high. The net financial position grew by 1,779 million euros in the third quarter compared to the end of the second quarter.

Inditex distributed 0.35 euros per share on November 2, 2020 as an ordinary dividend for fiscal year 2019. In fiscal year 2020, Inditex maintains its dividend policy, which consists of a pay-out of 60% of profit and an additional distribution of 0.78 euros per share to be distributed in fiscal year 2021 and 2022. Dividend payments will be made semi-annually in May and November.

‘Ecommerce’

The sale online it continues to grow significantly (+ 75% in the first nine months). Online visits have grown by 44% to 3,427 million. 97% of the growth in online sales was organic.

The group has continued to develop its differentiation plan for its commercial space and its online offer, with very relevant openings in 25 markets, including China, Mexico, Russia, Germany, Spain and Saudi Arabia. Zara expands markets with sale to 85 online integrated into the local network of stores, which are added to the 106 markets with sales online through its global website.

On December 3, it opened online in Panama and Puerto Rico and during the quarter it has accessed 12 new online markets, including Chile, Costa Rica, Honduras and Tunisia. Lefties opened its online store in Spain and Portugal.

The textile giant recalls that investments in the 2020-2022 period will be about 900 million euros per year. The investment plan includes a digital investment of 1,000 million euros over these three years.

Forecasts

The company led by Pablo Isla is also making revisions for the fourth quarter. In November, 21% of the Group’s stores remained closed, with a significant impact on store sales. A majority of these stores already began to reopen in the first week of December.

Currently 8% of stores are temporarily closed and an additional 10% they close on weekends. Additionally, a very significant number of stores have relevant restrictions on capacity, capacity and opening hours.