Profit at Spanish clothing giant Inditex, operator of the Zara fast fashion chain and the world’s second-largest clothing retailer, rose 7% last year, thanks to growth across all regions and a double-digit jump in online sales.
The company, whose brands also include Pull & Bear, Bershka and Massimo Dutti, today (14 March) said net profit in the year ended 31 January totalled EUR3.4bn (US$4.2bn), up from EUR3.2bn a year earlier.
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Net sales rose 9% to EUR25.3bn from EUR23.3bn in the prior year, while sales in local currencies grew 10%. The retailer, which operates 7,475 stores, said new space in prime locations grew 7.4%. Gross margin in the period, however, narrowed slightly to 56.3% from 57% last year.
Like-for-like sales, meanwhile, grew 5% in the 12-month period – 6% in the first half and 5% in the second half – compared to 10% last year, and were positive across all geographies and in all concepts. The like-for-like calculation includes 80% of total store and online sales.
Online was the star performer, with sales surging 41% to account for 10% of group sales in 2017. The group began online sales for Zara in Singapore, Malaysia, Thailand, Vietnam and India during 2017 and today (14 March) added Australia and New Zealand.
In its update, Inditex said store and online sales in local currencies have increased by 9% from 1 February to 11 March 2018.
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By GlobalDataInditex has also announced the appointment of Carlos Crespo as its new chief operating officer (COO), with responsibility for coordinating the functions of logistics, IT, procurement and sustainability. Crespo previously served as head of internal audit.
Despite Zara’s status as the world’s largest fast-fashion retailer, Florence Allday, beauty and fashion associate at Euromonitor International, believes its sales slowed last year due to a lack of distinction between seasonal collections, and general market saturation.
“To continue to be a key player in the fast fashion arena, Zara needs to ensure that its constant, uninterrupted flow of new designs and products is matched by a digital retail experience that is equally seamless. With competitors like Asos, Amazon and Missguided enjoying enormous sales and growth, thanks to their sleek online platforms, Zara must streamline its payment and delivery options to ensure that its online shoppers remain loyal.”
She also notes that consumer attitudes are shifting, preferring to pay more for quality over quantity. “To ensure that it remains relevant, Zara must emphasise the quality and longevity of its garments and justify its low price points to ethically-conscious consumers.”
