Inditex Group’s net sales climb 2% to €5.7 billion in the first three months of 2018 fiscal year

  • Sales growth of 7% in local currencies
  • Revenue reached a new first-quarter record of €5.7 billion, during a period marked by significant exchange rate effects
  • Same-store sales growth was positive in all geographies
  • The chairman and CEO, Pablo Isla, highlighted that "the strength of the integrated store andonline model, bolstered by continued innovation, is driving solid growth and notable job creation"
  • The group launched online sales for Zara in Australia and New Zealand during the quarter
  • Retail space kept growing, while the company continued differentiating, optimising and upgrading its store portfolio
  • In April, the company distributed €42 million among 88,000 employees under its extraordinary employee profit-sharing plan. In total, between commissions, incentives and bonuses, the Group has distributed €562 million over the past year
  • Sales increased by 9% in local currencies between 1 May and 11 June 2018
     

KEY FIGURES (first-quarter 2018. € million)

  1Q18 1Q17 YoY 2Y CAGR*
Net sales 5,654 5,569 2% 8%
Gross profit
Gross margin

3,328
58.9%
 

3,240
58.2%
 
3% 8%
EBITDA 1,125 1,113 1% 9%
EBIT 851 834 2% 10%
Net profit 668 654 2% 10%


*CAGR: compound annual growth rate


Inditex registered net sales growth of 2% in the first three months of its new fiscal year (1 February –30 April 2018) to €5.7 billion, marking a new first quarter record. The period was marked by significant exchange rate movement with sales growth in local currencies of 7%.

Growth was underpinned by solid business performance and same-store sales growth acrossall geographies. Gross margin improved by 68 basis points from the same quarter a year ago to 58.9%. Net profit reached €668 million in first quarter of fiscal 2018, up from €654 million in the same period a year prior.

Inditex’s chairman and CEO, Pablo Isla, noted that "the strength of the integrated store and online model, bolstered by continued innovation, is driving solid growth and notable job creation".

I. HIGHLIGHTS

During the first quarter, the company continued to expand its integrated store model, launching onlinesales in Australia and New Zealand and continuing with its strategy of differentiating and optimising its store portfolio, with space continuing to grow from a year prior.

During the first three months of fi scal 2018, the Group’s brands opened new stores in 36 markets, while continuing with the Group’s strategy of absorbing smaller-sized units and expanding and refurbishing others, closing the period with 7,448 stores. Refurbishments and investments are mainly connected to the introduction of the latest technologies related to the Group’s integrated store and online model.

Framed by this strategy of reinvesting for future growth, Inditex finalised the expansion of its head offices in Arteixo (A Coruña, Spain) in May. The complex will continue to house Zara and Zara Home’s design, product, technology, distribution, logistics and sustainability teams as well as Inditex Group’s shared service professionals.

Functionality and sustainability are the bedrocks of this 80,000m2 facility. It consists of two buildings that are interconnected via passage ways to the existing complex. The building’s exterior features climate sensitive vertical slats which move to ensure energy efficiency. Indigenous plants requiring little water are in beds watered by rainwater and the building hasadopted locally-sourced recycled materials. These efficiency measures will reduce energy consumption by 45% and water use by 30%. The facilities willqualify for LEED Gold certification.

A further new distribution centre in A Laracha (A Coruña, Spain) spans 90,000m2 and is due to beoperational this summer, as scheduled. Located 15 minutes from the Arteixo headquarters, this centre will complement the Group’s existing logistics platforms in Spain. In parallel, work continues on the new logistics hub in Lelystad (Netherlands). Investment in these new facilities exceeds €150 million.

II. EMPLOYEE PROFITSHARING PLAN

In April, the company distributed €42 million among 88,000 employees with at least two years’ service in its stores, manufacturing facilities, logistics platforms, brands and subsidiaries as part of phase one of the Group’s 2017-2018 extraordinary employee profit sharing plan.

This plan commits to pay out 10% of the annual growth in net profit, which yielded a figure of €21 million in 2017 which the Group then increased by a further €21 million.

This €42 million is on top of the €520 million paid out in 2017 to the entire workforce in the form of performance-based bonuses and commission, to bring the total variable remuneration for the year to €562 million. With the inclusion of fixed wages the group paid out a total of €3.27 billion in remuneration in 2017.

III. GROWTH ACROSS ALL REGIONS

All of the Group’s brands opened flagship stores in all of its geographic regions in the first quarter. In addition to the launch of online sales in Australia and New Zealand, Zara opened its first stores in the cities of Buffalo (New York) and Murray (Utah) in the US, and in Pune (India). It also expanded flagship stores in San Francisco (US), Yokohama (Japan), Warsaw (Poland) and Moscow (Russia). In May, Zara opened its iconic flagship in Bilbao (Spain) and also its expanded Stratford store in London, the first with a dedicated online –in-store section.

During the first quarter Zara also extended and refurbished one of its most important flagship stores in the world: that located in the Vittorio Emmanuele shopping arcade in Milan (Italy). As in Stratford and Roppongi (Tokyo), the brand opened a popup store for online orders during the refurbishment. This is a novel format where the brand has taken the opportunity to introduce the latest technology designed around the integrated shopping experience.

Pull&Bear, meanwhile, opened a new four-storey flagship store on Madrid’s calle Preciados, one of the world’s busiest shopping streets, as well as a new store on Via XX Settembre in Genova (Italy). In addition, the brand expanded and upgraded its stores on Gran Vía (Madrid) and Portal de l’Àngel (Barcelona), and relocated its establishment in the Westfield London, White City shopping centre, one of the most important in London (UK).

Continuing with this strategy of differentiation of stores, Massimo Dutti opened flagship stores in Zaragoza (Spain), on Amiraplatz in Munich (Germany), in the Solana shopping centre in Beijing (China) and the Istinye Park centre in Istanbul (Turkey). Both feature the latest technological innovations which the brand is introducing in its new stores such as interactive fitting rooms and the RFID mirror system.

Bershka introduced its new Stage store image in its newly relocated store on Portal de l’Àngel (Barcelona) and in its refurbished establishment in Puerto Madero (Mexico), while Stradivarius deployed its new eco-store concept at its flagship stores on Paseo de Gracia in Barcelona (Spain) and Eindhoven (Netherlands) and in its refurbished and expanded stores in the White City (London) and Dubai Mall (United Arab Emirates) shopping centres. This new image is articulated around the use of natural timber which contrasts with white and cement features. Plants and lighting are also vital components of this new store concept, injecting a sense of freshness, clarity and dynamism. The LED lighting meets the Group’s eco-efficiency criteria.

Oysho opened a new two-storey flagship store in Milan (Italy), in the Piazza San Babila with an entrance and shop window onto Corso Venezia. Zara Home, meanwhile, opened a new flagship store in Palma de Mallorca, Spain, unveiling a new store concept. Madrid’s emblematic Calle Serrano was home to the reopening of Uterqüe’s flagship store during the quarter, similarly displaying the brand’s new store image.

IV. COMMERCIAL INITIATIVES

Zara continued to innovate during the first quarter with its ZaraAR initiative, which brought augmented reality technology to 130 flagships globally in a world-first in the retail sector. The brand projected its launch tagline 'Dear Australia' in the middle of Sydney Bay, opposite the iconic Opera building, helping to draw media attention and prominent fashion professionals to the Australian city for the unveiling of its first online platform in the region.

Under Join Life, the label used by Inditex's products that adopt the latest sustainable production techniques and fabrics, Zara, Oysho and Massimo Dutti expanded their collection, while Pull&Bear joined the initiative for the first time.

All of the brands embarked on innovative commercial initiatives during the initial months of the year. This included the fashion show organised by Massimo Dutti in the Palais du Tokyo in Paris featuring 'See Now Buy Now' capabilities, the commemoration by Stradivarius of Keith Haring's 60th birthday with a capsule unisex collection that arrived in the brand's stores at the same time as a collection inspired by Mexico's Frida Kahlo, to mark the 110th anniversary of her birth.

Extending Oysho's long-standing support for women's sporting events, particularly the Women's Race in Spain which it has been sponsoring since 2013, the brand sponsored the same event in Mexico City. Pull&Bear, meanwhile, launched its new Pacific Republic line targeted at its youngest followers, a range of sweatshirts and t-shirts whose designs and prints are inspired by the worlds of surfing and skate-boarding. Zara Home launched a new Signature Collection, a new cosmetics concept within its product range.

V. GIVING BACK TO THE COMMUNITY

On the social and environmental responsibility front, the company’s ‘for&from’ programme attained a new milestone with the opening of Uterqüe´s first store in The Style Outlets centre in San Sebastián de los Reyes (Madrid, Spain), which is managed by people with disabilities.

With a floor area of 313m2, the store is being managed as a franchise by the Prodis Foundation, whose mission is to train and provide end-to-end support to people with disabilities and their relatives. It will employ 16 people, 13 of whom have disabilities. In the wake of this new addition, Inditex now has 14 ‘for&from’ stores franchised under six of its brands (Pull&Bear, Massimo Dutti, Bershka, Stradivarius, Oysho and Uterqüe), as well as Tempe (the company that designs and sells the Group’s footwear and accessories). Altogether they employ 167 people.

VI. SECOND-QUARTER TRADING UPDATE

Sales in local-currency terms rose by 9% between 1 May and 11 June 2018.

Inditex has scheduled its Annual General Meeting for 17 July. The Board of Directors will ask the company’s shareholders to approve the payment of an overall dividend from 2017 profits of €0.75 per share, €0.375 of which was already paid out on 2 May 2018; the balance would be paid on 2 November 2018.

In addition, the Board will propose Pilar López, General Manager of Microsoft Spain, as a new independent board member. She will replace Carlos Espinosa de los Monteros, whose mandate expires on July 15th , 2018. Inditex is grateful to Mr. Espinosa for his contribution to the Board during the past 21 years.