Zara owner Inditex has revealed a jump in first-half profits and a strong start to its third quarter despite searing heatwaves across many of its markets.
The Spanish group – which also owns brands including Bershka, Pull & Bear and Stradivarius – reported a 7% rise in pre-tax profits to 3.85 billion euros (£3.3 billion) for the six months to July 31.
It saw sales rise 9.2% on a constant currency basis over the first half, with overall revenues up 7.6% at 19.76 billion euros (£16.96 billion).
The fast fashion giant said its autumn/winter collections have also so far been “very well received” by shoppers, with sales up 9% on a constant currency basis between August 1 and September 7, which comes in spite of ongoing heatwaves in Europe and the UK.
Chief executive Oscar Garcia Maceiras said: “These excellent results highlight the extraordinary capabilities of our teams.”
He said the group had been trading in a “highly complex global environment”.
Hot weather and the Iran war have been impacting consumer confidence and spending patterns for many European fashion firms.
Inditex shares fell in Madrid, down 4%, as investors were unimpressed by lower-than-expected profit margins, at 58.7%, and as recent sales growth did not accelerate.
Angeline Ong, senior technical analyst at IG, said: “Inditex shares were priced for perfection heading into its earnings print, with the stock trading at around 24 times forward earnings after a run of analyst upgrades.
“So when results came in ‘good, but not accelerating’, the market punished the stock.
“Even solid numbers aren’t enough for a stock at that valuation – investors need proof that the outlook is looking brighter, not just steady growth.”
But Susannah Streeter, chief investment strategist at Wealth Club, said Inditex’s figures showed “there’s still appetite for retail therapy, particularly if the price is right”.
Its cheaper brands, Bershka and Stradivarius, delivered double-digit sales growth in the first half, she said.
“These brands are at the slightly cheaper end of Zara’s wardrobe of fashion names and seem to be touching the sweet spot when it comes for a desire for style updates, while keeping an eye on tighter budgets,” she said.
Inditex had fewer shops at the end of its first half, at 5,444 worldwide, against 5,528 a year earlier, with most brands seeing reductions.
But its budget brand Lefties increased its shop footprint to 223 from 210 a year earlier, with its first UK stores also opening in the second half in the Liverpool One shopping centre, followed by Lakeside in West Thurrock and Gateshead’s Metrocentre.
Lefties was originally launched in 1999 as an outlet for cut-price, leftover Zara stock, but has since developed into a standalone concept to challenge the likes of Primark.
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