Zara owner Inditex reports strong August sales despite heatwaves
LONDON: Zara owner Inditex reported a stronger-than-expected start to its autumn trading on Wednesday, with currency-adjusted sales up 9% in August, despite extreme heat across Europe reshaping shopping patterns in its biggest market. The fast-fashion group made €11 billion ($12.8 billion) in sales in its second quarter running May to July, a resilient performance in the face of high energy…
Zara's parent company Inditex reported stronger-than-expected August sales, up 9% despite extreme heatwaves across Europe disrupting shopping habits in its largest market. The fast-fashion giant generated €11 billion in sales during the April-June quarter, showcasing its resilience amid high energy prices and reduced consumer sentiment after the Iran conflict.
CEO Oscar Garcia Maceiras praised his teams' performance, noting the company is operating in a "highly complex global environment." Zara's shares hit a record high of €59.1 last month, surpassing the value of luxury group Hermes. Meanwhile, Hong Kong IPO filings for budget fashion platform Shein revealed a sales slowdown, indicating that European fast-fashion retailers may face less intense competition.
The Spanish company plans to expand its budget brand, Lefties, into Britain and open a store in Germany next year, targeting lower-income shoppers who have been deterred by Zara's shift towards higher-end products. Inditex's gross profit rose by 8.3% in the first half, reaching €11.6 billion, with a gross margin of 58.7%, slightly below analysts' expectations.
Traders had anticipated a 2-3% drop in Inditex's shares, but the company's shares are now trading higher. The fast-fashion group reported that its autumn/winter collections have been well-received by customers, with August sales up 9% compared to the same period last year, despite the sweltering heatwaves in Europe. Analyst Anne Critchlow from Berenberg stated that current trading looks "very good" despite a tougher comparison to the previous year, the heatwaves, and the slowdown in US consumer spending reported by Inditex's peers.
As hotter weather becomes more common, retailers are adjusting their sourcing schedules to accommodate the extended summer season, which typically kicks off with the sales of jackets and coats. Western Europe recorded its hottest June and July on record, as climate change drives up temperatures and increases the risk of wildfires.
Inditex has allocated an additional €200 million in capital expenditure to upgrade its corporate offices, in addition to the €2.3 billion already earmarked for this year's store revamps and logistics improvements. BC analysts estimate Inditex's annual capital expenditure is around three times that of its Swedish rival H&M.
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