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Inditex Sales Slow in Q1 as Logistics Efforts Ramp Up

Inditex Group built on its omnichannel initiatives in the first quarter, while posting small gains in sales and income.

In a Nutshell: Inditex continued to roll out its global, fully integrated store and online platform in the first quarter. In the three months through April, Inditex opened stores in 36 markets, finishing the period with 7,448 units in 96 markets.

The company launched online sales for Zara in Australia and New Zealand during the quarter. The company said growth was underpinned by same-store sales growth across all geographies.

Inditex finalized the expansion of its head offices in Arteixo, Spain, in May, noting that functionality and sustainability are bedrocks of the facility. It consists of two buildings that feature climate-sensitive vertical slats that move to ensure energy efficiency. Indigenous plants requiring little water are in beds watered by rainwater and the building has adopted locally sourced recycled materials. These efficiency measures will reduce energy consumption by 45 percent and water use by 30 percent.

The complex will continue to house Zara and Zara Home’s design, product, technology, distribution, logistics and sustainability teams, as well as Inditex Group’s shared service professionals. A new distribution center in A Laracha, Spain, is set to be operational this summer. Located 15 minutes from headquarters, this center will complement the company’s existing logistics platforms in Spain, while work also continues on a new logistics hub in Lelystad, Holland. Investment in these new facilities exceeds 150 million euros ($176.54 million), the company noted.

Zara continued to innovate during the first quarter with its ZaraAR initiative, which brought augmented reality technology to 130 flagships globally. Under Join Life, the label for Inditex products made with the latest sustainable production techniques and fabrics, Zara, Oysho and Massimo Dutti expanded their collection, while Pull&Bear joined the initiative for the first time.

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Sales: Net sales increased 2 percent to 5.7 billion euros ($6.71 billion) in the first quarter ended April 30 compared to 5.6 billion euros ($6.6 billion) in the first three months of the 2017 fiscal year. Inditex said this marked a new first-quarter record during a period of “significant exchange rate effects.”

Earnings: Net income rose 2 percent to 668 million euros ($786 million), from 654 million euros ($770 million) in the comparable prior year period. Gross profit rose 3 percent to 3.3 billion euros ($3.9 billion), as gross margin reached 58.9% of sales compared with 58.2% in the prior-year quarter. Earnings before interest, taxes, depreciation and amortization (EBITDA) grew 1 percent to 1.1 billion euros ($1.3 billion).

CEO’s Take: Pablo Isla, chairman and CEO, said: “The strength of the integrated store and online model, bolstered by continued innovation, is driving solid growth and notable job creation.”