Though Inditex ended 2019 with more than $8 billion in the bank, the parent company to Zara has seen sales in the first two weeks of March plunge 24.1 percent, signaling a coronavirus crisis whose full effects have yet to be felt.
In a Nutshell: Inditex Group has temporarily closed 3,785 stores in 39 markets, in response to measures recommended and requested by the health authorities in all of its markets, the fashion firm said Wednesday.
All stores in China are now open, with the exception of 11 units, per health authority guidelines.
Online sales continue and the company’s supply chain continues to function normally, demonstrating the flexibility of its business model, Inditex noted. Inditex has decided to hold an inventory provision of 287 million euros (about $312 million), in light of the escalating COVID-19 pandemic, the firm said.
Amid the growing health crisis, store and online sales in local currencies decreased 4.9 percent between Feb. 1 and March 16, falling 24.1 percent in the first half of March alone. February sales usually represent around 6 percent of the group’s total annual sales and March sales typically account for around 7 percent.
While it is too soon to quantify the future impact of the pandemic on its operations in 2020, Inditex said it is monitoring developments closely and has “the utmost confidence in our business model and its long-term perspective.”
Inditex’s net cash position increased 20 percent year on year to 8.06 billion euros ($8.76 million), driven by strong business momentum throughout 2019.
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In fiscal year 2019, the company invested 1.2 billion euros ($1.3 billion) in the growth of its fully integrated store and online store network that is now present across more than 200 countries. The platform operates 7,469 stores in 96 markets and 44 global e-commerce platforms.
RFID technology has been fully deployed at Zara, Massimo Dutti and Uterqüe, with the aim of completing the rollout in 2020 at all the other brands. As a result, the store and online integrated stock management system, already fully deployed at Zara, will also be fully implemented across all of the group’s brands in 2020.
In the year, Zara launched dedicated online storefronts in Brazil, South Africa, Ukraine, Philippines, Colombia, United Emirates, Kuwait, Oman, Qatar, Jordan, Bahrain, Saudi Arabia, Egypt, Indonesia, Israel, Lebanon, Morocco and Serbia.
Sales: In the fiscal year ended Jan. 3, Inditex’s net sales increased 8 percent 28.29 billion euros ($30.76 billion), underpinned by growth across all brands and in all geographies. Like-for-like sales growth was 6.5 percent, girded by momentum in all regions and brands, both in-store and online.
Net sales in Inditex’s home country of Spain rose 4.6 percent and represented 15.7 percent of total sales, with Europe excluding Spain accounting for 46 percent, Asia and the rest of the world making up 22.5 percent, and the Americas 15.8 percent. Inditex reported growth in sales from its online platform of 23 percent to 3.9 billion euros ($4.24 billion), which was 14 percent of the total.
Earnings: Net profit grew 6 percent to 3.64 billion euros ($3.96 billion) for the year. Earnings before interest, taxes, depreciation and amortization (EDITDA) increased 39 percent to 7.88 billion euros ($8.57 billion).
CEO’s Take: Pablo Isla, executive chairman of Inditex, said: “I would like to call for calm at every level and express a message of total faith in the decisions being taken by the health authorities. Inditex is demonstrating through these [financial] results the solidity of its business model and its balance sheet, results which demonstrate the hard work and dedication of all of the professionals who are part of this company, from the factory and logistics teams to the store and corporate staff, from our designers to our sales professionals.
“In this environment, I appeal today for your composure, trust and solidarity,” Isla added. “Thanks to the united response we are displaying across the various affected countries and cities, we are confident that together we will overcome this situation. Thanks to the company’s strong financial position and principles, we stand ready to respond in any way necessary.”