Inditex posts profits rise but makes €287m coronavirus provision

Inditex, owner of the Zara chain, generated an 8% rise in net sales to €28.29bn and like-for-likes climbed 6.5%. The retailer said it has decided to recognise an inventory provision of €287m in the wake of coronavirus.  That meant that net profit was up 6% to €3.64bn. Without the provision, it would have climbed 12% to €3.86bn.Last year Inditex’s online sales rose 23% to €3.9 billion, or 14% of total revenues, and the group invested €1.2 billion in ”the growth of its fully integrated store and online store network”.

Inditex reported that “as of yesterday”, it had shut 3,785 stores in 39 markets as coronavirus spread. Since the start of February, sales in-store and online have fallen 4.9% on a local currency basis and slumped  24,1% between March 1 and March 16.

The retailer said that in view of the ongoing uncertainty it has not yet decided whether to pay a dividend on last year’s performance and net income generated will be put into reserves for the time being.

Inditex said: ”The solidity of the group’s 2019 earnings and strong balance sheet puts us in a strong position for tackling the challenges emerging in 2020. Although it is too soon to quantify the future impact of the Covid-19 outbreak on our business operations, Inditex has the utmost faith in its business model and its strong financial position, supported by the flexible and responsive decision-making capabilities of the company and all of its professionals.”