14 March 2018
Inditex's net sales rise 9% to €25.34 billion in fiscal 2017
Revenue from online sales grew 41% in FY17, with 10% of total sales now online and 12% of the total in markets in which it has an online presence
- In local currencies, growth of store and online sales was 10%.
- Like for like sales growth was 5%, with positive growth across all geographic areas and in all concepts.
- EBIT reached €4.3 billion, 7% higher than in 2017, 12% in local currencies.
- Net profit totalled €3.37 billion, year-on-year growth of 7%.
- The Board of Directors plans to submit a motion to increase the dividend by 10.3% to €0.75 per share at the Annual General Meeting.
- In FY17, Inditex invested €1.8 billion in further developing its integrated stores and online model and upgrading its technology. Specifically, the rollout of RFID technology has improved flexibility and response times by integrating stores and online inventories.
- Inditex is set to distribute €562 million in variable remuneration to its employees, €42 million of which under the scope of its Extraordinary Profit-Sharing Plan.
- The store count at year-end 2017 had increased by a net 183 stores. This included the opening of 524 stores in 58 markets, offset by 341 smaller units which were replaced or absorbed by larger stores. As part of its ongoing plan to focus on larger units in prime locations, the group enlarged 144 flagship stores and refurbished a further 122 stores.
- The year-end store count stood at 7,475.
- The Group opened its first stores in Belarus and launched its online sales platform in India, Vietnam, Singapore, Thailand and Malaysia. Seventy-nine per cent of Inditex's stores are already eco-efficient.
- The Group's worldwide tax contribution was nearly €6 billion. In Spain its contribution surpassed€1.6 billion, over €500 million of which was corporation tax.
- Store sales increased by 9% in local currencies between 1 February and 11 March 2018.
Inditex Group's net sales rose by 9% in FY17 (1 February 2017 - 31 January 2018) to €25.34 billion, underpinned by growth in all of the geographic regions where the Group does business. In local currencies, sales growth was 10% in 2017.
Like-for-like sales rose by 5%, with all geographies and all brands delivering growth by this measure.
The revenue from online sales increased by 41%, to account for 10% of the Group total and 12% of the total in markets in which it has an online presence.
EBITDA, meanwhile, increased by 4% from fiscal 2016 to €5.3 billion (8% in constant-currency terms, excluding the impact of movements in exchange rates). EBIT reached €4.3 billion, 7% higher than in 2017, 12% in local currencies. Net profit amounted to €3.37 billion, marking year-on-year growth of 7%.
Inditex's Board of Directors will submit a motion for the payment of a €0.75 per-share dividen , marking year-on-year growth of 10.3%, at the Annual General Meeting scheduled for July. An interim dividend of €0.375 per share will be paid out on 2 May 2018, and the remaining €0.375 per share would be paid out, if approved, on 2 November 2018 in the form of a final and special dividend.
Since the year-end, store sales in local currencies increased by 9% between 1 February and 11 March 2018.
The Chairman and CEO of Inditex, Pablo Isla, described it as a year of "solid growth", and highlighted, "the unique strength of our integrated stores and online model and its significant growth potential". He went on to add that "the prescient investments made in technology and logistics in recent years, coupled with space optimization, mean the company is well placed for continued growth across all its markets".
Chief Operating Officer
Carlos Crespo has being appointed to the new position of Chief Operating Officer (COO), in charge of the coordination of IT, Logistics and Transport, Works, Procurement, and Sustainability departments.
He will report directly to the Chairman and CEO, and will focus primarily on the digital transformation of the company and reinforcing the Group's integrated store and online business model. Crespo was formerly the Group's Internal Audit Director. Paula Mouzo, previously Internal Audit deputy director, has been appointed as new Internal Audit director to replace Crespo.
KEY FIGURES (€ millions)
|2017||2016||YoY Growth||YoY Growth |
in local currencies
|Revenue from sales||25,336||23,311||9%||10%|
|Gross profit |
DEVELOPMENT OF THE BUSINESS MODEL
In FY17, Group capital expenditure amounted to €1.8 billion and was focused on significantly boosting the development of its integrated and sustainable model of stores and online.
Reflecting this focus, the group has integrated each brand's online businesses into the entities which operate its physical businesses in each market.
During the year Inditex expanded its online reach by launching Zara online platform in India, Malaysia, Singapore, Thailand and Vietnam in 2017, with the brand's online store due to go live in Australia and New Zealand today, 14 March 2018 (Appendix I). Bershka, meanwhile, launched its e-commerce platform in the US, Japan and South Korea, where Oysho also inaugurated its online store.
The company continued to build its online platform in 2017 and early 2018. The Group's websites received 2.42 billion visits in 2017 and at the peak serviced as many as 249,000 orders per hour. The social media profiles of the Group's eight brands have amassed 121 million followers.
In FY17, the Group opened 524 new stores in 58 markets. In line with the streamlining strategy announced five years ago, net openings were 183 stores once smaller stores replaced or absorbed by larger stores are taken into account.
In parallel it carried out major expansion work at another 144 stores and thoroughly refurbished a further 122. In the last six years, 80% of the Group's floor space has undergone a makeover with 2,994 new openings, 2,148 refurbishments and extensions and the absorption of 1,046 smaller and older units. As a result, the Group ended FY17 with 7,475 stores and one new market: Belarus
All the new stores have been rolled out under the eco-efficiency plan so that 79% of the total store count is already part of this initiative which is scheduled for completion by 2020.
During the reporting period it also added new online services, such as Same-day Delivery in the central areas of Madrid, London, Paris, Istanbul, Shanghai and Taipei, and from today in Sydney; and its Next-day Delivery service in Spain, France, United Kingdom, China, Poland and South Korea, and also in six Australian cities from today, with the intention to gradually introduce this service in other markets.
Tied to the strategy of integrating the physical and online stores, the Group is also offering an in-store click& collect service for online orders, which at the newly expanded Zara store in Marineda (A Coruña, Spain) are fulfilled via a novel automated in-store pick-up point. The Zara store in Stratford, London, which is due to reopen its doors in May, following major expansion and refurbishment work to leave it at 4,500m2, will feature, in addition to the traditional Women's, Men's and Kids sections, a dedicated Online department with an automated in-store pick-up point for online orders capable of processing over 2,400 orders.
Until it reopens its flagship store, Zara is offering its customers in Stratford the first store specialised in the placement and collection of online orders, as well as the processing of returns and exchanges. This pop-up store spans nearly 200m2 and offers a select choice of women's and men's clothing which can be purchased online in the store, along with the rest of the brand's extensive fashion range.
Inditex also made progress on its strategy of fully integrating store inventory with those in online warehouses, which is translating into greater flexibility, faster delivery and enhanced customer service. Inditex already has 19 stockrooms in 17 markets, that enabled the company to integrate stock management for stores and online.
On the logistics front, it continued to invest to introduce new technology, notable among which was the expansion of new automated storage and distribution systems to various Group platforms, including one specifically tailored for the distribution of beauty products at the logistics centre in Arteixo (A Coruña, Spain). Meanwhile, construction work at the logistics connection hub in Lelystad (Netherlands) and the new distribution centre in A Laracha (Spain) continues on schedule.
The RFID system, fully up and running at Zara, will be fully deployed this year at Massimo Dutti, Pull&Bear and Uterqüe, and Group-wide by 2020.
Throughout 2017, the Group also continued to roll out mobile payment capabilities, already configured in 27 markets, in three of which (Spain, France and the UK) using the apps developed by the Group's brands and the all-brand payment app, Inwallet. The reach of the paperless e-receipt system currently stands at 37 markets.
In parallel, the company continued to differentiate its flagship stores with high-profile openings, extensions and refurbishments such as the Zara store on Castellana 79, Madrid (Spain); the Zara store in Flora Fountain in Mumbai (India); the new iconic Zara flagship store in Venice (Italy); the new Zara flagship store in Aventura Mall in Miami (United States); the new Pull&Bear on Rue de Rivoli in Paris (France); the Massimo Dutti in Plaza de Colón in Valencia (Spain); the expansion of the Bershka store in Shibuya, Tokyo (Japan); the reopening of the Stradivarius store in A Coruña (Spain); the new Oysho establishment in Turin (Italy); the Zara Home on Nanjing Road (Shanghai, China); and the Uterqüe store in Madrid, fea-turing this chain's new brand image. (Appendix II: Photo Gallery)
In line with its sustainable growth strategy, the company also obtained LEED certification for six new stores, for the new Stradivarius design centre in Cerdanyola del Vallès (Spain) and for Oysho's head offices in Tordera (Spain).
REMUNERATION AND EXTRAORDINARY PROFIT-SHARING PLAN
The Group is set to distribute over €562 million to its employees from FY17 on top of their regular salaries. €520 million corresponds to bonuses and commissions and another €42 million to the April 2018 distribution under the Extraordinary Profit- Sharing Plan in which the Group's employees participate in its earnings growth. Under this plan, the Group has committed to paying out 10% of the growth in its net profit, which this year results in a figure of €21million, which the Group is going to increase by a further €21 million.
This bonus payment will be distributed among the approximately 88,000 people who will have been working for the Group for more than two years as of 31 March 2018.
The Group continues to have a significant knock-on impact on the Spanish economy. In FY17, some 7,500 suppliers invoiced Inditex €5.18 billion, €550 million more than the year before.
In FY17, Inditex contributed €5.96 billion to the exchequers of the various countries it operates in, 6% more than in FY16. Of the total, €2.71 billion took the form of direct taxes, up 7% year-on-year. The Group's income tax contribution amounted to €985 million, with an effective worldwide tax rate of 22.5%.
In Spain, Inditex's contribution to the State exceeded €1.61 billion in 2017, including direct taxation (€1,010 million) and the tax collected as a result of its business activities (€602 million) (e.g. VAT and social security).
Corporate income tax amounted to €504 million, which is equivalent to over 2% of all corporate income tax collected by the Spanish tax authorities. As a result, Inditex's corporate income tax contribution to the Spanish revenue service has topped €2 billion over the last five years.
Throughout the year, all the group's brands continued to innovate with new commercial initiatives and ways to connect with customers. One such initiative was the expansion of Zara's environmentally-responsible Join Life collections to Massimo Dutti and Oysho.
The prestigious photographer Steven Meisel extended his successful collaboration with Zara for editorial pieces in the run-up to both the A/W and S/S collections. This strategic commitment to creativity was also on display in the website created by Zara for the Shape the Invisible project, an initiative undertaken in collaboration with the Royal Academy of Antwerp, Parsons School of New York, EnsAD of Paris and Kingston University of London.
Pull&Bear, meanwhile, was also active in 2017, extending its collaboration with six-time motor cycling world champion Marc Márquez, who designed his first collections together with the brand's in-house creative teams, and sponsoring the Pull&Bear Pantín Clássic Pro, Spain's highest-profile surfing competition.
Pull&Bear has also teamed up with Smart –Daimler Group- on a joint endeavour with a clear-cut focus on sustainability. As a result of this alliance, the carmaker will launch a limited-edition electric Pull&Bear Smart car, while Pull&Bear will sell a range made from sustainable raw materials inspired by Smart's aesthetic and by nature.
Massimo Dutti, strengthened its close ties with the world of show-jumping, celebrating the Massimo Dutti International Show-Jumping Competition in Paris (France) as part of the Longines Global Champions Tour – Paris Eiffel Jumping.
And in early 2018, the brand surprised followers with an inspired and innovative 'See Now Buy Now' catwalk show in the Palais de Tokyo in Paris (France), which was attended by representatives from the leading fashion houses from several countries. The event, at which the brand launched the most exclusive range within its collection, was also broadcast live over a number of digital platforms including the firm's own website, Tmall and Facebook. Lastly, as its name suggests, the fashion show's spectators had the chance to buy the selected looks on the spot.
In this same vein of innovation and digitalisation, Stradivarius recently introduced the role of Online Specialist in 900 of its stores, offering customers a personalised service covering every aspect of the online experience with Stradivarius. The Online Specialists offer shoppers the option of picking up their online orders faster and in a more personalised way in the brand's stores, without having to queue at check-outs; they also provide them with information about Stradivarius's online store and its digital projects, and resolve any queries they may have.
Bershka created two unique pop-up stores last year. Having opened its first pop-up store in New York's SoHo last October to support the launch of the brand's online platform in the United States, Bershka then opened another pop-up store – spanning 2,360m2 – in Rome, the brand's first on-street store in the Italian capital.
The store is located on Via del Corso, the city's emblematic shopping street, within the well-known Galleria Alberto Sordi. The store showcases all of the brand's ranges: Bershka, Bsk and Man.
Another important milestone for Bershka was its collaboration with Italian singer Fedez on the launch of the Misunderstood collection, inspired by the colourful and sporty styles of the 90s and the world of tattoos.
The Oysho Yoga Tour 2017 further established its credentials as the benchmark international yoga event, bringing together over 30,000 yoga lovers since it was first held in Barcelona in 2012. The tour visited Barcelona, Madrid, Milan, Doha, Moscow, Paris, Tunisia, Istanbul, Dubai and Bali in 2017, perfectly complemented by the Gymwear Yoga line.
Zara Home set its sights on the world of art and design in 2017, organising one of the most noteworthy initiatives in its history. On the occasion of the 56th edition of the Salone Internazionale del Mobile furniture trade fair in Milan, the brand presented La Grande Illusione, a pop-up installation in the Piazza San Babila store designed in collaboration with the British set designer and art director Simon Costin.
The spectacular assembly drew thousands of visitors to the store to experience how the dresses created by Costin were created from the brand's home décor items. In addition, the content created specifically for the brand's website and social media breathed life into the dresses by means of six photos taken by the artist himself.
In addition to Uterqüe's long-standing support for the world of art and the gradual refitting of its stores to reflect the brand's new image, last December the chain launched a capsule collection under the 'Atelier' label made exclusively from leather sourced from Spanish artisans renowned for their longevity in and mastery of the trade.
The collection consists of six ready-to-wear pieces and accessories, specifically a belt and maxi necklace studded with XXL natural stones and an abundant fur stole featuring an elegant gold buckle.
The Group remained highly active on the community investment front in 2017: its initiatives directly benefitted over 1.5million people. Eighty-two per cent of Inditex’s community investment effort in 2017 had a direct impact on five of the United Nations Sustainable Development Goals (SDGs).
In the education and employment field, it is worth highlighting the launch of two new stores under the Group’s for&from programme, stores which employ people with disabilities. The Group now operates 13 stores under this format, employing over 120 people with disabilities.
In March, Tempe opened a new for&from store in Madrid’s Sambil Outlet shopping centre in Leganés (Spain), which is managed by the Prodis Foundation and has a staff of 18, while Oysho opened its new for&from store in Llagostera, similarly managed by the Moltacte non profit cooperative.
The group also celebrated 10 years of the Salta initiative under which the Group has trained and hired 924 youths at risk of social exclusion in 12 cities around the world.
The Group also renewed its alliance with Médecins Sans Frontières, specifically for a series of emergency relief and refugee aid programmes in different parts of Turkey and Syria, projects for assisting Rohingya refugees in Bangladesh and efforts to fight acute malnutrition in infants in India. The updated agreement implies the contribution to MSF by Inditex of a further €2.3 million.
In addition, in 2017, the Group donated over 3.6 million articles of clothing valued at €13.8 million to several charities, including the Red Cross and Caritas, for programmes for combating poverty and social exclusion. In parallel, it donated $1 million to the Red Cross in Mexico to help with the emergency relief work in the wake of September’s earthquake.
Inditex was named the most sustainable company in the retail industry for the second year in a row by the Dow Jones Sustainability Index (DJSI), which flagged its leadership and pioneering stance on human rights. The Index also highlighted the company’s continued focus on reducing the amount of water and energy consumed in its business activities and through the Closing The Loop programme which collects used clothing in a growing number of the Group’s stores.
As for the initiatives carried out under its Closing the Loop programme it introduced its usedclothing collection scheme in 598 stores across eight markets. This initiative is also being piloted in a further four markets. In Spain, this programme is complemented by the 1,856 on-street clothing recycling containers placed in several cities in collaboration with Caritas. As a result of such programmes, including the home collection of used clothes while delivering online orders, the group has collected more than 19,000 tonnes of used clothing since they were launched late 2016, leading to the creation and maintenance of 350 jobs.
In 2017, the Group also celebrated the tenth anniversary of its Global Framework Agreement with IndustriALL Global Union, which represents over 50 million workers in 140 countries.