Inditex, the owner of Zara, announced on Wednesday that sales of its first autumn/winter collections have recently increased. This growth has offset a slight revenue decline in the first half of the year, which aligned with analyst projections.
The fashion company reported an 11% sales increase in constant currency from August 1 to September 8. This growth surpassed the decline seen in the preceding months.
The world’s largest listed fashion retailer announced a 10% gain in first-half earnings as sales climbed by 7.2%. This slower pace, compared to last year, aligns with analysts’ projections of tougher times ahead for European fashion retailers, partly due to wetter-than-expected early summer weather.
Inditex reported net earnings of 2.8 billion euros ($3.09 billion) and sales of 18.1 billion euros in its first half, which ended in July, despite the challenges faced in June. In contrast, experts surveyed by LSEG predicted a profit of 2.77 billion euros with sales of 18 billion euros.
Analysts from HSBC, RBC, JPMorgan, and Bestinver predicted that Zara sales would soar into the double digits over the first five weeks of its third quarter, which starts in August. This was in contrast to Zara’s initial predictions, which were shattered by a rainy and chilly June in Spain, the company’s largest market.
The fashion brand has invested in technology and logistics to stay ahead of competitors like H&M and the rapidly growing Shein. It has also worked to minimize price increases on everyday items while quickly bringing fashion trends to market.
The bad weather in numerous countries contributed to H&M’s prediction that June sales would decline 6% in local currency compared to the same month last year. Primark’s summer sales were similarly negatively impacted by the British weather.
“I don’t look at stocks with a short-term horizon and a three-to-five year view. Inditex is the best fashion retailer in the whole brick-and-mortar space, as well as online,” said fund manager Vera Diehl of Union Investment, who considers Inditex’s gap with H&M and Shein has widened.
“The company takes long-term strategic decisions,” Diehl remarked.
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