Inditex exhibits impressive resilience despite dependence on COVID-affected Europe

Following today’s release of Inditex figures for Q3 YTD FY2020/21, Pippa Stephens, Retail Analyst at GlobalData, a leading data and analytics company, comments:

Inditex’s clothing specialism continues to make it highly susceptible to the impacts of the COVID-19 pandemic, with widespread store closures and dampened fashion demand causing net sales to fall by over €5.7m during Q3 YTD FY2020/21. While the worst of its troubles were concentrated towards the beginning of the outbreak, as consumers had little need for new apparel as they stayed at home, its performance during Q3 shows impressive resilience, with sales falling a comparatively modest 13.5% during the period. This is despite subsequent waves of the virus and several national lockdowns across Europe over the past few months, where Inditex has a wide presence (64% of its revenue in H1 FY2020/21 came from Europe).

“As consumer appetite for fashion starts to recover, Inditex has successfully maintained its desirability with a promising reaction to its AW20 collections and long queues observed outside stores. Its core brand Zara has increased its mix of loungewear, enabling it to capitalise on consumers’ shifted lifestyles, while its homewares fascia will have retained appeal, as shoppers looked to improve their living spaces as they spent more time indoors. Massimo Dutti is likely to have been Inditex’s worst performer as formalwear has fallen out of favour with shoppers due to a lack of events and increased working from home. The group has also reduced its inventory by 11% over the last nine months, highlighting the efficiency of its supply chain, with many apparel players, like M&S and Gap, currently struggling with excess stock due to a weaker demand for their products.

“While Inditex’s group revenue for Q3 FY2020/21 was broadly in line with its major competitor H&M, which this morning reported a decline of 14.8% for the three months to November, Inditex’s superior online growth of 76% highlights the success of its recent digital efforts. In 2020, the retailer launched new websites across 18 of its markets, broadening its reach and adapting to consumers’ desire to shop online with ease. These investments will be fruitful in the long term too, as although physical sales should recover as a vaccine is rolled out and consumers regain confidence to shop instore, online will be heightened for the foreseeable future as shoppers enjoy the convenience of this channel.”

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