Inditex – Zara Owner’s profits rise, but still below pre-pandemic levels

Inditex – Zara Owner’s profits rise, but still below pre-pandemic levels
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Sales in the first quarter were €4.9bn, up 56% from last year, excluding the impact of currency changes. However, that remains 11.5% lower than 2019. The group reported net income of €421m, compared to a €409m loss in 2020 and €734m profit in 2019.

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Q1 2021 hedge fund letters, conferences and more

As at 6 June, 98% of stores were open and sales in the first month of the new quarter came in 102% ahead of 2020 and 5% ahead of 2019.

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The group plans to pay the remaining €0.35 dividend payment on 2 November 2021, bringing the total to €0.70.

The shares were up 1.2% following the announcement.

Inditex’s Online Presence Helped Offset A Fall In Foot Traffic

“Given nearly a quarter of the group’s trading hours were lost to lockdowns between February and April, Zara owner Inditex’s results were pretty attractive. The group’s efforts to bolster its online presence helped offset a fall in foot traffic and contributed to a 101% increase in overall sales. This also helped the group swing from a €508m loss in 2020 to report underlying profits of €569m.

While the resilience shown by Inditex should be commended, the retailer isn’t out of the woods yet. Operating costs rose, as stores reopened and the group continued its push online and profits are still less than half of pre-pandemic levels.

Investors should be mindful that although Inditex is in a better position than some of its peers, its share price has returned to pre-Covid levels ahead of its business. With a price-to-earnings ratio some way above the long-term average, the market is betting on a strong recovery. So far, all signs are pointing in the right direction, but we’re expecting plenty of speed bumps along the way—particularly for a company like Inditex, whose prices sit on the higher end of the spectrum in the retail space.”

Article by Laura Hoy, Equity Analyst at Hargreaves Lansdown:

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