16 Sep 2020
Posted in Coronavirus
Inditex showing strong signs of recovery following COVID-19 thanks to digital capabilities
Following today’s release of Inditex H1 figures for 2020/21, Chloe Collins, Senior Retail Analyst at GlobalData, a leading data and analytics company, comments:
“Despite being a star performer in the global apparel market in recent years, like other fashion players, Inditex has been massively impacted by the COVID-19 pandemic, with net sales throughout H1 FY2020/21 falling by almost €4.8bn to €8.0bn, and EBITDA dropping by €2.0bn to €1.5bn. However, as stores have started to reopen worldwide, sales are steadily improving, with Q2 experiencing a decline of 31.9% in contrast to 44.3% in Q1. With 98% of its locations now open again, sales in the last month (1 August – 6 September) have been particularly promising, only down 11% on the year, thanks to the group’s digitalisation efforts, inspiring product ranges and affordable price points which cater to financially conscious shoppers. Its domestic market, Spain, has been the hardest hit during H1, accounting for 14.7% of sales versus 15.6% in H1 FY2019/20, as a result of its high prevalence of coronavirus cases. However, the rest of Europe is showing potential for quick recovery, likely thanks to its advanced online market, with 48.9% of sales now coming from the region, up from 44.4% last year.
“Though all of Inditex’s brands saw a sales decline between 30-42% in H1, Oysho was the strongest performer (-30.9%), which is no surprise due to its specialism in lingerie, nightwear and comfortable loungewear. In contrast, Massimo Dutti was the brand hardest hit, with sales falling 41.9% as a result of its more formal styles. Inditex must take full advantage of its vertically integrated supply chain and its ability to quickly react to trends, especially given its high proportion of European factories. It must adapt to changing consumer lifestyles and incorporate more casual styles into its brands, as Zara, which accounts for 68.9% of group sales still features a heavy presence of smarter styles online.
“Inditex’s digital investments over the last few years have paid off, with online sales impressively growing by 74% during the period. With seven new local websites launching during H1, followed by a further nine planned to go live by the end of September, Inditex is in a strong position to benefit from the continuing consumer shift to online shopping, as concerns around visiting physical stores remain and more lockdowns are put in place. However, its main brand Zara has become renowned for its outlandish model images online, and would benefit from choosing shots which allow browsers to better see the garment and its fit, to drive up conversion.”