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Inditex Posts $465 Million First-Quarter Loss

Inditex leaned on its industry-leading supply chain to navigate rough first-quarter waters amid pandemic-induced store closures that drove an influx of sales to its digital channels.

In a Nutshell: Online sales rose 50 percent in the first quarter ended May 2, and jumped 95 percent in April alone, helping to offset losses from temporarily closed stores as the coronavirus outbreak spread worldwide. The Zara owner now expects digital sales to account for more than 25 percent of total global sales by 2022.

Inditex credited its flexible supply chain as a pivotal asset through COVID-19 because it “continued to operate normally” amid a period of unprecedented disruption.

Now that public health restrictions have eased, Inditex has reopened 5,743 stores across 79 markets as of June 8. “It is expected that most key markets will have reopened by the end of June,” the company said, noting that it has seen “progressive recovery in markets with reopened stores.”

Net Sales: The company said net sales for the quarter ended May 2 fell 44.3 percent to 3.30 billion euros ($3.76 billion) from 5.93 billion euros ($6.75 billion) a year ago.

Inditex said its gross profit margin was 58.4 percent, versus 59.5 percent in the year-ago quarter, due in large part to its flexible supply chain. Operating expenses fell 21 percent and have remained under tight control, the company said.

Earnings: The company reported a net loss of 409 million euros ($465.5 million) from net income of 734 million euros ($835.3 million) in the year-ago period. On an adjusted basis, excluding the 308 million euros ($349.9 million) for the store optimization program, the loss was 175 million euros ($198.8 million).

Looking ahead, the company plans to complete its store optimization program by 2021, and is planning total annual capital expenditure of 900 million euros ($1.02 billion) through 2022, including digital investments of over 1 billion euros ($1.14 billion). As part of the store optimization program, Inditex will integrate store and online operations to enhance synergies, which is expected to improve store, inventory and supply chain management while stimulating digital sales growth.

The company said it ended the quarter with a net cash position of 5.8 billion euros ($6.60 billion).