Inditex Group first half net sales up 11% from a year earlier

  • Over the past 12 months, Inditex has created almost 10,000 new jobs, of which 2,421 were in Spain
  • Inditex's Chairman and CEO, Pablo Isla, has highlighted "the importance of its model which fully integrates bricks-and-mortar stores and online", emphasising the technological investment by the company in this sphere
  • In the first half, total net sales reached €10.47 billion, with net profits of €1.26 billion, up 8% from a year earlier
  • Like-for-like sales grew by 11%
  • Inditex opened new stores in 38 markets during the period, closing the first half of 2016 with a total of 7,096 stores
  • The Group currently has a presence in 92 markets following the launch of Zara in Vietnam on 8 September
  • All brands will launch online sales in Turkey in October. The Group currently operates online in 39 markets
  • Over the period, Pull&Bear opened its new head office, which features the latest advances in eco-efficient building, while Stradivarius has launched a new global flagship in London
  • Between 1 August and 18 September 2016, stores and online sales in local currencies grew by 13%

Inditex's net sales during the first half of 2016 (between 1 February and 31 July) increased by 11% to €10.47 billion, with positive growth in all geographical areas where the Group is present. Sales in local currencies grew 16%. Net profits hit €1.25 billion, up 8% from the same period the previous year. Like-for-like sales grew by 11%, on top of 7% growth over the same period in 2015.

All of the Group's brands increased their international presence during the period, with 83 new stores in 38 countries. This takes the Group's total number of stores to 7,096. Following the launch of Zara in Vietnam in the third quarter, the Group now has a presence in 92 markets, 39 of which also boast online stores.

Inditex's chairman and chief executive, Pablo Isla, highlighted "the importance of its model which fully integrates bricks-and-mortar stores and online", emphasising the technological investment being made by the company in this area. He continued: "Both our online and bricks-and-mortar stores are seamlessly connected, driven by platforms such as mobile payment, and other technological initiatives that we will continue to develop".

KEY FINANCIAL INDICATORS (IH16)
(€ billion) 1H16 1H15 16/15
Sales 10.47 9.42 11%

Gross margin
    on sales

5.95

56.8%

5.47

58.1%
9%
EBITDA 2.11 1.97 7%
EBIT 1.61 1.49 8%
Net profit 1.26 1.17 8%


Job creation

Once more, Inditex has been able to continue significant job creation, with some 9,932 new jobs created over the past 12 months.

Some 2,421 of these jobs were created in Spain, where the Group is headquartered, with new staff to support international growth as well as from investment in operating capacity of the Group's facilities.

BRAND´S INITIATIVES AND EXPANSION

Expansion in all geographic areas

During the first half of 2016, all brands have opened important stores in prime locations, with a total of 83 new stores in 38 different international markets. During the period, the Group ventured into three new markets– Aruba, Nicaragua and Paraguay– and during the third quartered in September it opened its first store in Vietnam meaning that Inditex is now present in a total of 92 markets. Each brand has continued with the Group's strategy of investing in their image both online and in physical stores.

In this regard, it is worth highlighting the new Zara store opened on calle Compostela in A Coruña, Spain on 1 September, located close to the Group's headquarters. The new store includes 2,400 m² of retail space spread over five floors displaying Zara's latest collections – Woman, Man and Kids. The building has been carefully renovated to conserve the architecture that represents the city's heritage and highlights many of building's original features. The store displays, vast windows and glass galleries, and has been put forward for LEED Gold environmental certification as part of the Group's eco-efficient store plan.

This new opening of a landmark store of global importance has been accompanied by other significant new stores, including in Soho, New York, in the United States, or the Group's first stores in Aruba and Nicaragua. Zara has opened stores in a range of markets such as China, Canada, Thailand, Saudi Arabia, Germany, Mexico, Indonesia and Japan. There has also been significant expansion work to stores in Puerto Rico, Cologne (Germany) and Antwerp(Belgium), which, in line with the brand strategy, have increased their retail space as well as renewed their image. On September 8th, Zara also added its first store in Vietnam in Ho Chi Minh City. The brand is also set to launch in Auckland, New Zealand during the first week of October.

Meanwhile, Pull&Bear has opened its new headquarters in Narón, Spain, which incorporates the latest eco-efficient building technology. This includes open spaces, reductions in water consumption and emissions, efficient use of energy and air quality measures.

The brand has also sponsored international events including the Pantin Classic Pro world surfing championship and Moto GP championship (as the official sponsor of the Aspar motorcycle team). It has also continued to update its store concept California, starting with the opening of the brand's store on Calle Hermosilla, Madrid, in November of last year. Also noteworthy are the brand's new stores in Russia, Luxembourg and Austria, along with openings in another 20 countries including Mexico, the United Kingdom, Italy, France, Nicaragua, Jordan and China.

Massimo Dutti reached an important milestone with its launch in India with its store in New Delhi's Citywalk shopping centre – this marks the Group's second brand to enter the Indian market. The brand's image has been further enhanced with the photographic work of Mario Testino. It hasalso updated its online website and app, achieving a very fluid, user-friendly browsing experience. Massimo Dutti has also revamped its fortnightly digital publication, Paper, a platform of contents for all of the brand's product lines: Women, Men, Boys&Girls and Personal Tailoring.

One of the most significant initiatives within Massimo Dutti's new store concept is its Tailored Corner; a section that aims to achieve a new take on classic tailoring to offer new pieces in top-quality fabrics along with more relaxed workwear, including jackets, pencil skirts, dresses and layering pieces.

The brand has continued to develop this new store concept, which also introduces more space and the use of marble, leather, and hardwoods as essential elements of its interior decoration. Other new motifs are inspired by the brand's traditional support for international equestrian events, both in its architecture and in its fashion offering. This concept has been implemented not only in the New Delhi store but also in the recently launched stores on Xiangyin Road in Shanghai, China; Buchanan Street in Glasgow, United Kingdom; Pacific Centre in Vancouver, Canada; and Kutuzovsky Prospekt in Moscow, Russia. It has also been used in new stores in France, Switzerland, South Korea, Taiwan (China), Germany and Italy.

Meanwhile, during the same period, Bershka's activity was characterised by efforts to strengthen its links with music. The brand has initiated collaborations with Spotify with the Bershka Festival Tour; a new digital platform inspired by the greatest music festivals as examples of the synergies between fashion and music. This microsite, hosted on Bershka.com, offers weekly charts linked with each of the festivals and personalised for each individual user. The site uses algorithms with contents designed by expert stylists to suggest different fashion looks in line with users' musical tastes.

Alongside these initiatives, the brand has also launched its Young Designers Project, which offers opportunities to young people with talent to display their work in the brand's image stores, introducing two new concepts in its retail offering: Papelería and Bath&Body. The first is a range of office materials, which incorporates the latest fashion trends into the world of illustration. Bath&Body offers a range of high-quality bath and skincare products.

Strong links with music are evident in the new store concept developed by the brand under the title Stage with a focus on technology and sustainability. New devices offer customers more precise information on collections, with additional aspects that improve stores' eco-efficiency: doormats made from recycled tyres, chemical-free paints, efficient air-conditioning systems, LED lighting with low-consumption control, recycled wood, and so on.

This new store concept has been implemented in all store launches during the period, with significant refurbishments to stores on Vittorio Emanuele in Milan, Italy; Hong Kong; and Oxford Street, London, in the United Kingdom. This new image is also present in the store on Nanjing Road in Shanghai, China. Moreover, the brand has opened stores in countries such as Russia, Mexico, Austria, Guatemala, Nicaragua, Indonesia and Japan.

Stradivarius has also held its annual event The Event Paper at its recently opened flagship store at No. 309, Oxford Street, London; a space that has become an international landmark for the brand, with more than 1,500 square metres of retail space. The event was attended by model Hailey Baldwin.

The brand has announced its first menswear collection for the Spring/Summer 2017 season, and has also achieved significant milestones with store openings in Amsterdam, Holland; a flagship store in Tel Aviv, Israel; and other new stores in Mexico, Indonesia, the United Kingdom (two new stores), China, Nicaragua, Hong Kong SAR, Italy, Saudi Arabia, Russia, and more.

Oysho has continued to develop its store image, strongly linked with the concept of a woman's healthy lifestyle, in particular the fusion of sport and women's fashio n. Of note is the support the brand has given to Spain's female Olympic gymnastics team, which achieved a silver medal at the Olympic Games held in Rio de Janeiro in August this year. The brand has also continued with its initiatives Free Yoga by Oysho in different cities around the world. Oysho has recently launched a line of Soft Basics which depicts a wide range of size options and designs in lingerie.

The brand has seen various important new stores launched in Calle Corso Vercelli in Milan, Italy; in the Times Square mall in Hong Kong SAR, China; and Calle de Tetuán in Seville, Spain; with a new store concept that has also launched in countries such as Belgium, Panama, Jordan, Russia and South Korea.

All of these stores have launched their Olympic collection, which has introduced the latest advances in technical fabrics, blended with an original approach to fashion inspired in cities that have hosted the Olympic Games over the years such as Los Angeles, Seoul and London.

Zara Home has also been extremely active following the introduction of its new store image, which combines larger spaces with light wood and more natural light.

The brand has launched a new digital magazine called The Journal, with a new edition every two weeks: another example of the integration of bricks-and-mortar stores and the digital world. It engages in a 360-degree strategy involving all of the brand's departments, including store staff, who play a vital role in the publication. Each edition of the magazine is dedicated to a particular category of products. Store staff receive thorough training on every product, its materials, quality and characteristics, as well as recommendations for use and special features in order to offer enhanced service to customers.

In terms of retail, in September the brand started a new line of products, Laundry, which offers a selection of washing liquids, softeners and ironing liquids that have been specially selected and designed to tie in with the defining characteristics of Zara Home.

All of these new products were offered in new stores opened during the period in question, including the store in Nanning, China; Garosu Street in Seoul, South Korea; and the Mall of Africa in Johannesburg, South Africa; as well as in other countries including Japan, Belgium, the United Kingdom, Austria, Jordan, Serbia, Sweden and Indonesia

Next week, Uterqüe will open its new store concept in Braga, Portugal, while its support for the world of art continues in the form of its collaboration last week with the Madrid Gallery Weekend.

Uterqüe's new store image is closely linked with art, and is inspired by the Mid-Century movement, evoking the aesthetics of the 1950s with a modern twist. Suspended ceilings expand store spaces with the aim of offering a welcoming atmosphere in which sustainability is the central theme, with LED lighting throughout and centralised energy saving programme.

Apart from the inauguration in Portugal next week, this new image is due to be launched in new stores in Spain, Mexico, Poland and Ukraine.

Online sales expansion

At the same time, the group has continued to expand its online retail offering to 11 countries during the first six months of 2016: Bulgaria, Croatia, Slovakia, Slovenia, Estonia, Finland, Hungary, Latvia, Lithuania, Malta, and the Czech Republic, meaning that the brand is now present in 39 markets (see Annex). In this respect, it is very much worth mentioning the new sustainability section featured on zara.com, which not only includes descriptions of the Group's environmental and social policies but also offers new customer services such as the collection of customer's unwanted clothing in areas where this option is available.

Inditex´s online stores for all brands are due to launch in Turkey on 5 October.

Payment via mobile phone

In line with this development, in September Inditex launched mobile phone payment in all of the Group's stores in Spain, with the objective of gradually extending the service to other countries. This new service is available to customers both in the form of online apps for eight of Inditex's brands and a specific app for the whole Group called InWallet, which users can download from the platform serving their respective operating system. All of the Inditex Group's apps – Zara, Pull&Bear, Massimo Dutti, Bershka, Stradivarius, Oysho, Zara Home and Uterqüe – appear under the name Wallet. These apps, along with InWallet, allow customers to fully manage their shopping receipts on and offline, doing away with the need for paper receipts.

SOCIAL AND ENVIRONMENTAL

Social programmes during the first half of 2016

Activity during the first six months of the year has also included work on the Group's social initiatives. In particular, the period saw openings of various stores in Igualada and Ferrol as part of thefor&from initiative to integrate people with disabilities. These two new stores take the project total to 11 establishments.

One of the project's stores was opened in Igualada in Barcelona, Spain in April under Massimo Dutti and in collaboration with the non-profit organization Moltacte. The store employes 15 people with disabilities. The other store was opened in Ferrol last week, the 11th store to be opened as part of this project. The Ferrol store is under Pull&Bear, and is run in collaboration with the Galician Confederation for People with Disabilities (Confederación Galega de Personas con Discapacidade, COGAMI).

Another highlight is developments in the Salta Mundo programme, which aims to integrate people on the edge of social exclusion into the labour market through the Group's stores. In July, the project added São Paulo, Brazil to the list of cities where this initiative is being developed. The programme has now been established in other 11 cities (Madrid, Barcelona, Athens, Berlin, London, Lisbon, Paris, Milan, Warsaw, Mexico City and New York), facilitating the integration of more than 800 people into the labour market.

During the first six months of the year, the Group has also donated funds to rescue operations and humanitarian aid for victims of the earthquakes in Ecuador and Italy that took place in April and August respectively. The Group has contributed €200,000 and €1 million to these two causes respectively, by means of various organisations including Cáritas and the Red Cross, with funds mainly targeted at medical assistance for the injured, rescue operations involving trained dogs, psychological and social support for the effected population, and mobile kitchens serving people displaced from their homes.

Also over the period, in April, Inditex's Chairman, Pablo Isla, and the Chancellor of the Comillas Pontifical University ICAE-ICADE, Julio L. Martínez, signed a collaboration agreement governing the creation of the Chair of Refugees and Forced Migrants. The Chair will support collaborative programmes involving the University and non-profit organisations working in the sector, promoting academic research in the sphere of migration to be applied in the field to support refugees and also to seek to raise awareness of the issues.

The Chair will focus specifically on the incorporation, shelter and social integration of refugees in Spain and Europe.

Start of the second half of 2016

Between 1 August and 18 September 2016, sales in local currencies in stores and online have grown 13%.

In line with the proposal approved by the Shareholders' Meeting held on 19 July, on 2 November 2016 payment will be made of the ordinary supplementary dividend and extraordinary dividend, to a total gross sum of €0.30 per share. This gives a total dividend of €0.60 per share corresponding to the financial year 2015.

GLOBAL ONLINE SALES PLATFORMS APPENDIX