MADRID (Reuters) – Zara owner Inditex forecast healthy sales as soon as lockdowns are lifted, after the coronavirus crisis knocked its net profit to 1.1 billion euros ($1.31 billion) in 2020, a drop of 70% on the previous year.
Inditex said on Wednesday that it expected nearly all of its 6,829 shops worldwide to be open by mid-April based on current estimates of when restrictions are due to ease, with around 15% of its stores still closed as of March 8.
“As soon as the stores reopen, the level of sales becomes very healthy,” Chairman Pablo Isla said on a conference call.
But Isla also emphasised that online sales would be key to Inditex’s strategy going forward, with just under a third of total sales last year coming from its website and app, up from 14% in 2019.
“We have been able to offer our clients the products they would have found in store, online, thanks to our integrated stock offering,” Isla said in a press conference.
Inditex’s radio frequency technology, attached as a chip to the alarm on clothing to keep track of stock, was rolled out across all its brands this year, allowing customers to identify from the app whether an item is in stock in a nearby store, and pushing inventory down 9% on the year.
Online sales across all brands have been rolled out in ‘practically 100%’ of markets the retailer operates in, Isla said, adding that in China, brands oriented towards younger consumers like Bershka and Stradivarius were now selling exclusively online.
SPRING COLLECTIONS HIT THE RAILS
Zara’s website shows a new collection of knitwear, bodysuits and baggy shirts for women and casual vests and jeans for men, suited to a continued working-from-home lifestyle.
The spring collection was “strong” and “bright”, Isla said, adding: “It’s full of bright colours, very optimistic.”
Excluding its five significant markets with stores still closed, Germany, Brazil, Greece, Portugal and Britain, Inditex said like-for-like sales in the first week of March grew 2%.
The impact of lockdowns was clear in the fourth quarter when net profit fell 53% to 435 million euros on sales of 6.3 billion euros, a steeper drop than the 26% in the third quarter as restrictions came back into force across much of Europe.
Total sales for the year were down 28% to 20.4 billion euros, with a 25% drop in the fourth quarter at Inditex, which is the owner of eight brands including Massimo Dutti.
Although the results were worse than expected by analysts polled by Refinitiv, the Spanish retailer outperformed competitor H&M.
The Swedish clothing company, which is due to report December-January sales next week, posted an 88% profit drop in its results in January.
Inditex shares were up 0.2% in early afternoon trading.
The company returned to a 60% dividend payout policy plus bonus dividends to be paid in May and November 2021 after postponing its payment last year.
Inditex has so far closed 751 of the 1,200 stores it plans to shut by the end of the year in favour of flagship locations from which it can serve both online and instore customers.
Isla said it does not foresee closing a ‘relevant’ number of additional stores.
($1 = 0.8423 euros)
(Reporting by Victoria Waldersee, Editing by Inti Landauro, Alexander Smith and Elaine Hardcastle)