Inditex swings to loss as sales slump amid Covid-19

(Sharecast News) - Spanish fashion retailer Inditex said on Wednesday that it swung to a loss in the first quarter as sales slumped amid the Covid-19 pandemic.
The owner of Zara and Massimo Dutti posted a net loss of €409m compared to a profit of €736m in the first quarter of last year, as sales fell 44% to €3.3bn, with up to 88% of its stores closed at some point during the pandemic.

Inditex said sales have been recovering gradually as stores have reopened, with markets such as China and South Korea and, in Europe, Germany, standing out.

With 52% of its stores open in May with capacity restrictions in most markets, store and online sales in local currencies were down 51% compared to last year. In the period between 2 and 8 of June, store and online sales in local currencies improved, down 34%, while sales in markets that were fully open declined 16%.

The online segment was resilient, with sales up 50% in the first quarter and 95% higher in April alone.

Inditex said that over the next two years it will shell out €1bn to boost its online division and an additional €1.7bn to upgrade the integrated the store platform.

The retailer said it expects online sales to account for more than 25% of total sales by 2022, versus 14% in 2019.

Executive chairman Pablo Isla said: "The overriding goal between now and 2022 is to speed up full implementation of our integrated store concept, driven by the notion of being able to offer our customers uninterrupted service no matter where they find themselves, on any device and at any time of the day."

At 1000 BST, the shares were up 1.1% at €25.94.

Sophie Lund-Yates, equity analyst at Hargreaves Lansdown, said: "The combination of ambitious plans and weak sales has taken something of a hammer to profits and the end of lockdowns won't automatically translate into normal sales volumes. That said, Inditex is pivoting in the right direction, and if investors are prepared to take a longer-term view, this Spanish powerhouse is in a better position than most of its peers.

"It's also important to note Inditex's renewed focus on sustainable fashion. Consumers are becoming ever-more socially conscious, and staying ahead of any potential wide-scale backlash against fast fashion is a very sensible move."