Mar 18, 2020
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Coronavirus: Inditex March sales plunge, but it was top 2019 performer

Mar 18, 2020

Inditex’s full-year results on Wednesday, as expected, further illustrated the strength of the Spanish fashion powerhouse. But it seems that this time next year it's unlikely to be in such a strong position as it also included a current trading update and talked of the "very significant impact" the coronavirus is having. 


With stores closing down by government order in three of Europe's ‘big five’ economies (France, Italy, and Spain), and other countries also seeing store closures and plummeting footfall (even where shops remain open), a devastating impact is no surprise.

But the company said its online business "continues to develop as normal in all markets”. This is good news not only for Inditex, but suggest that other fashion retailers will also be seeing some level of economic activity going on, despite consumer caution at present.

The retailer also said that its supply chains continue to operate normally due to the flexibility of its business model and initial collections for the spring and summer season have been "very well received by customers”. 

But overall sales in local currencies have still fallen 4.9% between February 1 and March 16. And from the beginning of March, they’ve plunged 24.1%. As of today, 3785 stores are temporarily closed in 39 markets, but almost all of its stores in China are open. This is particularly significant and possibly a sign of hope that Europe in particular, as well as other regions, might get back to some sense of normality within a couple of months.

Understandably, all of the above rather overshadowed the group’s full-year results, but there was still plenty in that report to excite interest.

In 2019, its net sales rose 8% in both local currencies and on a reported basis to €28.3 billion. Online sales rose 23% to €3.9 billion and represented 14% of net sales.

Its gross profit rose 7% to €15.8 billion, but the gross margin was down 79 bps at 55.9%. Gross profit would have been 9% higher and that margin would have risen healthily if not for an inventory provision made to account for the impact of the coronavirus pandemic.

Inditex’s EBITDA rose to €7.6 billion from €5.5 billion and, without the aforementioned inventory provision, would have been up 44.5%. Meanwhile net income grew 6% to €3.6 billion, but would have risen 12% without that one-off provision.

It all suggests a company in robust good health, the pandemic aside, especially as like-for-like sales rose 6.5% last year with a 5% increase in the first half and a 7.5% rise in the final six months of the year.

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