Zara owner Inditex sees profits rise to €2.8bn on seasonal pick-up

The Spanish group said its profit rose 10 percent to 2.8 billion euros ($3.1 billion) in the first six months of its financial year ending July 31.

“The design and quality of our fashion proposition and the experience we offer our customers are, together with the efficiency and increased sustainability of our operations, the key to the solidity of these results,” Inditex chief executive Oscar Garcia Maceiras said in a statement.

Inditex, which also owns Pull&Bear, Bershka, Massimo Dutti and Stradivarius, said its spring and summer collections were “very well received” by customers.

Sales rose 7.2% to 18.1 billion euros, a slower pace than in the first six months of 2023, when they rose 13.5%.

Analysts, however, had expected a slowdown after four years of record earnings. The group’s net profit was close to analysts’ expectations polled by financial data firm FactSet.

The Spanish company has had a good year so far. In March, shares of Inditex rose to a record high, attributed to optimism surrounding its spring sales and strong performance in 2023, which helped it overtake Swedish rival H&M.

Retail giants have generally struggled with weaker results compared to the pandemic period as consumers tighten their purse strings amid economic volatility. This trend has also affected the world’s biggest luxury brands. But some of the customers high-end brands are losing may flock to the likes of Zara, boosting their bottom line.

“Inditex may have benefited from gaining share with more affluent consumers who have been priced out of more expensive brands due to rising prices and the cost of living crisis,” said Jelena Sokolova, senior equity analyst at Morningstar.

Separately, traditional fashion retailers have endured stiff competition from low-cost shopping platforms such as China-founded rival Shein or Ireland’s Primark.

But Inditex is set to expand under CEO Oscar Garcia Maceiras, appointed in 2021. Inditex’s results show that Europe continues to be its biggest market. It continues to grow the presence of its brands in Asia and the US, where Zara plans to open 10 new locations.

The retail giant plans to launch live streaming shopping services in the US and UK after already launching the popular format in China. Last year, it launched its second-hand retail platform in several European markets.

“Inditex continues to gain share from peers, and is doing so profitably, managing to pass on inflationary pressures into 2022 in the form of price increases, while differentiating itself from the low-cost area of ​​the market, where competition is intensifying with newcomers like Shein and Temu,” said Sokolova.