PARIS — With fewer stores but bigger sales, Zara parent company Inditex continued to show strength as first-half sales rose 10.2 percent at constant currency, or 7.2 percent on a reported basis, maintaining the momentum from the first quarter of the year.
The increase in sales was not due to price hikes, Inditex chief executive officer Óscar García Maceiras emphasized, but upping the number of items the Spanish retailer moved through its sales channels in the period.
“It’s all volume driven, and then the combination of very strong store and online platform [performance] and some space growth,” he said in a call with analysts following the release of the results.
The fast-fashion behemoth operates Bershka, Oysho, Pull&Bear, Stradivarius, Massimo Dutti and Zara Home in addition to its flagship Zara brand.
Without breaking down brick-and-mortar versus online sales, Maceiras did credit its newer, more selective physical retail model for a chunk of that growth.
The sales increase came even as the retailer continued with some targeted shutterings, bumping its number of stores down slightly, about 1.5 percent. It closed 47 Zara stores, 33 Oysho stores and 16 Zara Home stores, while opening 18 Pull&Bear locations.
However, it added sales channels in 34 markets, such as launching Zara sales online in Turkey as it continues to strengthen its omnichannel positioning, and opening physical stores in India, Peru and the U.S.
With targeted closures, the company is focused on expanding floor space and upscaling the interior design of its physical locations, and adding specialized departments like accessories, lingerie and including Zara Home inside some of its shops.
To that end, it opened its new 53,820-square-foot flagship in Lisbon on Sept. 5. Taking over an entire city block, the new four-floor outpost is now the second-largest Zara store it the world and includes a Zara Home department. The brand closed three stores in the city to condense its presence into the expansive space, in line with the brand’s overall retail strategy of absorbing smaller stores in major cities into flagship destinations.
Other stores with its cleaner design concept opened in Riyadh, Saudi Arabia; Liverpool, U.K.; Thessaloniki, Greece, and Bangalore, India, among other locations. The strategy will add a 5 percent bump in gross floor space by the end of 2026, even while store count continues to fall.
The first-half sales numbers were slightly ahead of analysts’ expectations, which had forecast them ringing in at 7 percent. Sales reached 18.1 billion euros in the six months ended July 31.
Gross profit increased 7.5 percent to 10.5 billion euros in the first half, while cash flow was up 9 percent.
There’s continued momentum going into the next season. Sales between Aug. 1 and Sept. 8 gained 11 percent at constant currency over the same period in 2023.
“Inditex has executed very well in recent years and has benefited from its strong design/buy set up and quick response business model,” RBC analyst Richard Chamberlain said in a note following the release.
With bigger, airier stores and incorporating its new RFID tags for better logistics, Inditex is holding about 1.7 percent less inventory than the same time period in 2023, which it credited to the “robust operating performance.”
While Zara is its superstar brand, Inditex is continuing to push its more youth-skewing concepts. Those are growing “at a very, very significant pace,” Maceiras said.
As China proves tricky to navigate and other companies are retreating as the country’s economy slows, including accessible luxury player SMCP and its Sandro brand and rival H&M, Maceiras said that Inditex continues to see it as a core market poised for growth.
The company is adjusting its Shanghai retail footprint and revamping its Zara flagship on the city’s Nanjing Road with the new design concept and will reveal other projects in the country in the coming months.
“We see a continuous positive progress of our operations in the market going forward,” Maceiras said.
“When you take [sales] in constant currency, we’re almost stable, which we believe is quite remarkable in the current context,” added Inditex capital markets director Marcos López García. “We are pleased with it.”
It also received a boost in the territory from the launch of livestreamed shopping last November, a success it hopes to replicate in Europe and the U.S. Similar shows will launch in Spain, France, Italy, Germany, U.K., Ireland, The Netherlands and across North America by the end of the September.
Zara’s Pre-Owned secondhand platform will open in the U.S. after being trialed in the U.K. and Europe. That will be operating by the end of October.
Maceiras maintained that Inditex is absorbing the costs of incorporating new materials through tech and other efficiencies, and not pushing its suppliers to cut costs.
