Inditex (Financials)
Financial overview
- Sales jumped 10.4% to €35.9bn (£31.2bn) in FY2023
- Online sales rose 16% to €9.1bn (£7.9bn)
- Gross profit margins grew from 57.0% to 57.8%
- Pre-tax profits rose to €6.9bn (£4.6bn)
- For latest financial results, click here
Inditex once more delivered record sales, rising 10.4% to €35.9bn (£31.2bn) for the year ending 31 January 2024 (FY2023) or 14.1% in constant currency.
Inditex chief executive Óscar García Maceiras commented “Inditex’s performance in 2023 has been excelllent. Our teams have been able to take advantage of the opportunities to keep growing profitably. We are investing to drive future growth and continue to offer an attractive renumeration to shareholders.”
The fashion retailer said its collections had been “very well received” by its customers with sales both on in store and online “very satisfactory”. Online sales jumped 16% on the previous year to €9.1bn (£7.9bn).
Sales were positive in all geographic locations, with Europe (excluding Spain) still representing the bulk of its sales, with total revenue share rising from 47.5% to 48.7% in FY2023.
Inditex had recorded revenues of €32.6bn (£27.9bn) in FY2022, rocketing 17.5% on the previous year (or 18% in constant currency).
All concepts grew in the latest financial year, with sales in Zara (which combines Zara and Zara Home) rising 9.6% to €26.1bn (£22.6bn), representing 72% of group turnover. Oysho delivered the strongest year-on-year growth, jumping 19.4% to €0.7bn (£0.6bn).
Gross profits rose 11.9% to €20.8bn (£18.0bn) with gross margins climbing from 57.0% to 57.8% in FY2023. Inditex said its control of operating expenses has been “rigorous”, with operating profits increasing from €5.5bn (£4.7bn) to €6.8bn (£4.7bn).
“Stringent control” had seen group operating profits leap from 15.4% to 16.9% to €5.5bn (£4.7bn) in FY2022 with operating expenses growing 15% year-on-year.
Group pre-tax profits surged to 28.2% to €6.9bn (£5.9bn) in the latest financial year, having risen to €5.4bn (£4.6bn) in FY2022.
UK financial analysis
To simplify its corporate structure, Inditex Group carried out a merger of its UK retail companies in October 2022. Zara UK purchased the trade and assets of the UK arms of Massimo Dutti, Bershka, Pull and Bear, Stradivarius, and Zara Home on 1 October 2022. On the same date, Zara UK changed its name to ITX UK Limited.
Sales at its UK subsidiary rose 5.6% to £1,586m in the year ended 31 January 2024 (FY2023). It said the cost of sales rose by 2% during the year, which had a “positive effect” on its profitability. UK gross margin jumped from 48.4% to 50.0% during the period with operating margin bolstered from 8.5% to 8.8%.
UK sales surged 37.4% to £1,501m in FY2022, with UK store numbers rising to 105 from 102, with 6 new store openings, three relocations and three store closures. It opened its new flagship Battersea Power Station store during the year.
In FY2021, total UK sales rose 74% year-on-year to £1,093m due to the described acquisition, although the retailer noted that trade had been significantly affected in its first quarter by government restrictions temporarily shuttering stores.
“Rigorous” control of its operating expenses saw UK operating profits climb from £61m to £127m in FY2022 with operating margins rising from 5.6% to 8.5%.
UK pre-tax profit margin rose to 8.9% in FY2023, having grown significantly from 5.5% to 8.5% in FY2022.
Ecommerce
The Inditex Group had an immature ecommerce business prior to the pandemic, with ecommerce sales representing around 10% share in FY2016.
However, the group has since invested in its digital capabilities, accelerating during the pandemic with online share lifting to around 32% share in FY2020. It has since decreased with stores reopening post-pandemic, settling at 25.5% share in FY2021.
Online sales “grew satisfactorily” in FY2022, up 4% to reach €7.8bn (£6.7bn). Inditex said its customer engagement “remains very high”.
Ecommerce sales continued to grow in the latest financial year, rising 16% to €9.1bn (£7.9bn). Inditex said active app users reached 152 million with online visits growing 10% to 6.5 billion visits in the year.
Inditex does not split out its UK online sales, with all UK figures Retail Navigator estimates.
Employees
Employee numbers remained more or less static at a group level in the latest financial year, edging up from 67,151 to 67,491 on a FTE basis.
Inditex had seen its FTE numbers rise significantly to FY2019, reaching just over 83,000. When the pandemic hit, employee numbers were scaled back, falling to some 72,000 in FY2020.
This had since risen to slightly to 72,620 in FY2021 with the retailer stating, “with the gradual return to normality after the pandemic, we have reinforced store recruitment at peak sales times of the year.” Its FTEs fell back in FY2022 due to the closure of its business in Russia.
Within the UK, employee numbers edged down from 4,685 to 4,649 in the latest financial year on an FTE basis. UK sales per employee rose from £320,500 to around £341,105 in FY2023.
Inditex staff costs to sales ratio rose slightly in FY2023 from 14.6% to 14.9%.
Its UK staff costs to sales ratio runs higher than the group, growing from 32.1% to 34.1% in FY2023.
Current year
H1
Inditex delivered a 7.2% sales rise to €18.1bn (£15.40bn) in the six months ended 31 July 2024 (H1 FY2024).
García Maceiras commented: “The design and quality of our fashion proposition and the experience we offer our customers are, together with the efficiency and increasing sustainability of our operations, the keys to the solidity of these results. Our fully integrated model continues to generate opportunities for profitable growth across all concepts, regions and channels.”
The fashion retailer said its spring/summer collections had been “well received” with “satisfactory development” both online and in stores. Sales in all its concepts were up on the previous year, led by Bershka and Stradivarius, which both climbed 16.7% during the half. Zara – its largest fascia – saw sales rise 5.4% to €13.03bn (£11.11bn).
Europe (excluding Spain) remained its largest market, taking 49.9% of sales in the period with revenue share in the US falling from 19.4% to 18.8%.
Inditex said its execution of its business model was “very strong” in the half, with gross profit margin climbing 19bps to 58.3%. EBITDA rose 8.1% to €5.0bn (£4.26bn).
The retailer said sales in its second half (between 1 August and 8 September 2024) have continued on a positive trajectory, jumping 11% on the previous year.
Q1
Inditex posted a 7.1% rise in sales to €8.15bn (£6.97bn) for the three months to 30 April 2024 (Q1 FY2024). The fashion retailer said its spring/summer collections had been “very well received” with sales climbing 10.6% in constant currency.
Inditex continues to optimise its store network, with openings across 28 markets in the period, although its overall store portfolio decreased from 5,801 stores to 5,698. The retailer now operates in 214 markets. On 3 April 2024 it reopened 19 stores and resumed online operations in Ukraine.
Gross profit increased 7.9% to €4.94bn (£4.23bn) in the quarter, with gross profit margin edging up from 60.5% to 60.6%. EBITDA climbed 8% to €2.37bn (£2.03bn) with pre-tax profit of €1.67bn (£1.43bn) for the period.
Inditex said growth has continued into its second quarter, with store and online sales jumping 12% in constant currency between 1 May and 3 June 2024.
The retailer continues to see “strong growth opportunities” ahead, with its key priorities to “continually improve the fashion proposition, to enhance the customer experience, to increase our focus on sustainability and to preserve the talent and commitment of our people.” It says it will be “developing several initiatives in all key areas” in the coming years.
Forecast
Inditex said it continues to see “strong growth opportunities”. Sales during the period 1 February to 11 March 2024 rose 11%
Retail Navigator forecasts that by FY2028, group sales will reach around £42.6bn with online representing a 26% share of overall trade. UK sales are expected to surpass £2bn by this time.
