According to the Financial Times, Zara owner Inditex will spend around \u20ac2bn to create more logistics \u201cmuscle\u201d in an attempt to boost sales growth. The news has pushed its shares to a record high.<\/p>\n\n\n\n
The Spanish fashion group announced that it will spend nearly \u20ac1.8bn on distribution centres over the next two years to increase sales of shoes and clothes. While reporting on its plans, the group also highlighted how the current quarter started strongly with increased sales being up 11% between 1 February and 18 March and said its spring and summer collections had been a hit with consumers. Sales were up 8.6% year-on-year to \u20ac10.4bn in the three months to the end of January and the figures pushed the share price 5% higher.<\/p>\n\n\n\n That increase was a continuation of a rally that started last October and supported the stock price with a boost of almost 33%, reaching \u20ac43.13 on Wednesday (18 March).<\/p>\n\n\n\n Discussing the results, analyst James Grzinic, said they \u201cconfirm just how much stronger than the rest of its peer group\u201d Inditex has become.<\/p>\n\n\n\n The company has been consistently increasing prices while focusing on\u2009more stylish designs in its attempt to beat its main competitor H&M.<\/p>\n\n\n\n \u00d3scar Garc\u00eda Maceiras, chief executive, highlighted and praised Inditex\u2019s \u201crigorous\u201d cost control in the past year. Expenses grew by less than sales and, in the final quarter, net income increased by 23.5% to \u20ac1.3bn, beating expectations.<\/p>\n\n\n\n The group\u2019s big plans to invest more have been questioned by analysts who are doubtful about the company\u2019s profitability. This \u201cextraordinary\u201d \u20ac1.8bn spend on logistics will be followed by another \u20ac1.8bn in 2024 which will be invested in opening 192 new stores, redecorating or expanding old ones, and renewing its ecommerce operation.<\/p>\n\n\n\n Inditex\u2019s capital markets director Marcos L\u00f3pez said the company was aware of the necessity to deliver \u201cattractive\u201d returns to shareholders and underlined that it was interested in investing \u201cahead of the cycle\u201d. He told analysts that the company \u201cshould add muscle for future expansion, for future growth\u201d.<\/p>\n\n\n\n The \u20ac1.8bn investment will help increase distribution centres for Zara, Bershka and footwear in Spain, and grow the existing Zara hub in the Netherlands. By the second half of 2025, the projects are expected to be operational. Zara has already 5,700 stores in more than 90 countries, but Garc\u00eda Maceiras said the aim was to improve the process of distribution so clothes can reach customers faster and easier, no matter where they are.<\/p>\n\n\n\n A dividend of \u20ac1.54 per share was announced for 2023, in line with market expectations.<\/p>\n\n\n\n In 1Q 2024, Inditex continued with a strong operating performance with the Spring\/Summer collections being well received by customers. Sales grew 7.1% and reached \u20ac8.2 billion. Sales in constant currency grew 10.6%, gross profit was up 7.3% to \u20ac4.9 billion. The gross margin had also increased 60.6% (+13 bps versus 1Q2023). Operating expenses increased 6.4%, but remained below sales growth. EBITDA increased 8% to \u20ac2.4 billion; EBIT was also up 10.3% to \u20ac1.6 billion and PBT 11.1% to \u20ac1.7 billion. Net income grew 10.8% to \u20ac1.3 billion. The strong operating performance resulted in a sharp increase in cash from operations.<\/p>\n\n\n\n Inditex continues to see strong growth opportunities. In the second quarter of 2024, store and online sales in constant currency between 1 May and 3 June increased 12% versus the same period in 2023.<\/p>\n\n\n\n Inditex remains focused on four key areas which will drive long-term growth: A unique fashion proposition, enhancing the customer experience, sustainability, and the talent and commitment of its people. At current exchange rates, Inditex expects a -2% currency impact on sales in FY2024.<\/p>\n\n\n\n In the fiscal year 2024, Inditex has set a target in terms of gross margin of +\/- 50 basis points. This year investing in new resources is seen as necessary for extending the brand\u2019s capabilities.<\/p>\n\n\n\n Owing to such future prospects, Inditex is undergoing a logistics development plan in 2024 and 2025. Unlike other forms of investment, this ambitious two-year investment program is aimed at the growth of the business and will cost up to \u20ac900 million for each of the financial years 2024 and 2025. The new investments will therefore be the most sustainable with the use of state-of-the art technology.<\/p>\n\n\n\n In respect of stores, Zara has opened new stores in new areas like the Zara Piraeus Tower in Athens (Greece). Also, they have undergone important expansions and restructuring in some of the most representative stores like Zara Rivoli Paris in France or Zara Skokie in Chicago U.S.A. They have also continued to open in relevant spots, for instance, Massimo Dutti in Cannes, France, Oysho in Stratford, London, United Kingdom, and Zara Home pop-up store on Rue du Bac, France.<\/p>\n\n\n\n If you are interested in trading Inditex stocks via CFDs or you just want to explore IronFX\u2019s wide range of stocks, you can open a trading account with the leading broker. From superb trading conditions to advanced platforms and free education, IronFX is by your side to help you navigate the exciting world of the financial markets. With dedicated multilingual customer support and your personal account manager, you will always have the necessary support to trade with certainty and security.<\/p>\n\n\n\n Avertissement : Ces informations ne doivent pas \u00eatre consid\u00e9r\u00e9es comme un conseil ou une recommandation d'investissement, mais uniquement comme une communication marketing. IronFX n'est pas responsable des donn\u00e9es ou informations fournies par des tiers r\u00e9f\u00e9renc\u00e9s, ou en lien hypertexte, dans cette communication.<\/i><\/em><\/p>","protected":false},"excerpt":{"rendered":" If you\u2019ve heard of Zara, Zara Home, Oysho, Pull…<\/p>\n![\"Inditex](\"\/wp-content\/uploads\/2024\/07\/inditex-logo-website.jpg\"){kind=logo}
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