Record profit for Inditex, owner of Zara, despite war and inflation

The Spanish fashion giant Inditexowner of the brand zaraobtained the highest profit in its history in 2022, despite the impact on its activities of the war in Ukraine and strong inflation.

The world leader in mass fashion, run for a year by martha ortegadaughter of billionaire Amancio Ortega, founder of the company, achieved 4.130 million euros (US$ 4.434 million) of net profit in its last fiscal year, which ended on January 31.

The figure, up 27% compared to 2021 (3.240 million euros), is a “all-time high” for the company, he said this Wednesday in a statement.

The group, based in Galicia (northwest), explained that this dynamic was due to the strong progression of sales, which reached an unprecedented level of 32,569 million euros (US$ 34,968 million), 17% more than in 2021.

Inditex congratulated himself on “the strength of [su] business model”in a delicate macroeconomic context, according to its CEO, Óscar García Maceiras, at a press conference.

Despite the good results, which coincide with the expectations of the analysts questioned by the financial information provider Factset, the Inditex share fell 4% on the Madrid Stock Exchange at 10:30 GMT, in a declining market (-2, 86%).

Rising costs

Like other textile groups, Inditexowner of eight brands, including Zara, Bershka and Massimo Dutti, saw its production costs increase considerably last year, due to global inflation.

The group, which has 165,000 employees, also suffered from the Russian invasion of Ukraine, leading to the suspension of activity in its 514 Russian stores.

At the end of October, it announced an agreement to sell the stores in Russia, until then its second most important market in the world after Spain, to the Daher group, owner of the Dubai Mall, one of the largest shopping centers in the United Arab Emirates.

According to Inditexthe stoppage of sales in Russia was offset by good results in Europe and USA -which has become the second market for the Spanish group-, as well as the increase in online sales.

Internet sales reached 7,806 million euros (US$ 8,377 million), an increase of 4% compared to the previous record achieved in 2021, the statement detailed.

The rise in transportation and manufacturing costs has been partly absorbed by a price rise during 2022, and by Zara’s decision to start charging for the return of orders placed online.

salary increase

These good results are known after the world leader in mass fashion accepted, in mid-February, to increase the salaries of all employees of its 5,815 stores.

The increases were 20% on average, according to the group’s unions, which satisfied a claim by workers to offset the impact of inflation on their purchasing power.

Despite the persistence of inflation, the textile group continues “contemplating great growth opportunities” in 2023.

Given the growth trend, the textile group – leader in low-cost clothing ahead of the Swedish H&M, the Chinese Shein and the Japanese Uniqlo – plans to increase the dividend paid to its shareholders by 29% for the year 2022.

An announcement undoubtedly to the liking of investors, who expressed concern a year ago about the possibility of a change of course with the arrival of Marta Ortega.

The daughter of Amancio Ortega and his right arm, Óscar García Maceiras, have opted for a model “continuous, with small adaptations”, Alfred Vernis, a professor of business administration at the Esade business school, told AFP.

A profitable choice, according to this former director of the textile group, who, however, considers the group’s progress towards green sustainability to be slow. Inditex debtand “accelerate this transition much more” to avoidr “to gradually lose demand”, added.

Source: AFP