FY2023 Results

/ In 2023, Inditex continued with a very robust operating performance due to the creativity of the teams and the strong execution of the fully integrated business model.

/ Oscar García Maceiras, CEO, "Inditex’s performance in 2023 has been excellent. Our teams have been able to take advantage of the opportunities to keep growing profitably. We are investing to drive future growth and continue to offer an attractive remuneration to shareholders".

/ The collections have been very well received by our customers. Sales grew +10.4% to reach €35.9 billion, showing very satisfactory development both in stores and online. Sales were positive in all geographical areas and in all concepts. Sales in constant currency grew 14.1%

/ The execution of the business model was very strong. Gross profit increased 11.9% to €20.8 billion. The gross margin reached 57.8%. The control of operating expenses has been rigorous. Operating expenses increased 10.0%, below sales growth

/ EBITDA increased 13.9% to €9.9 billion and EBIT 23.4% to €6.8 billion. PBT increased 28.2% to €6.9 billion

/ Net income increased 30.3% to €5.4 billion

/ Given the strong execution of the business model, lease adjusted funds from operations grew 22.2% and cash from operations grew 37.2%. The net cash position grew 13.3% to €11.4 billion.

/ The Board of Directors will propose to the AGM a dividend increase of 28% to €1.54 per share for FY2023, composed of an ordinary dividend of €1.04 and a bonus dividend of €0.50 per share. The dividend will be made up of two equal payments: On 2 May 2024 a payment of €0.77 per share (ordinary). On 4 November 2024 a payment of €0.77 per share (€0.27 ordinary + €0.50 bonus).

/ Outlook: Strong commitment to profitable growth. In 2022-2023, Inditex experienced significant increase in sales and productivity. Sales have grown 35% in constant currency in the period. The growth of annual gross space in the period 2024-2026 is expected to be around 5%

/ We estimate ordinary capital expenditure of around €1.8 billion in 2024. This investment will be mainly dedicated to the optimisation of our commercial space, its technological integration and the improvement of our online platforms

/ Logistics expansion plan: Two-year extraordinary investment programme focused on the expansion of the business allocates €900 million per year to increase logistics capacities in each of the 2024 and 2025 financial years

/ Spring/Summer collections have been very well received by our customers. Store and online sales in constant currency, adjusted for the calendar effect of an extra trading day in February due to the leap year, increased 11% between 1 February and 11 March 2024 versus the same period in 2023

FY2023: Very strong execution

In 2023, Inditex’s fully integrated model had a very strong operating performance. Sales, EBITDA and net income reached historic highs.

Inditex continues to focus on four key areas: A unique product proposition, enhancing the customer experience, sustainability, and the talent and commitment of our people.

Strong sales growth

In 2023, the collections have been very well received by our customers. Sales grew +10.4% to reach €35.9 billion, showing very satisfactory development both in stores and online. Sales were positive in all geographical areas and in all concepts. Sales in constant currency grew 14.1%.

Store sales

In 2023, store sales grew 7.9% reflecting incremental footfall and increasing store productivity. Our ongoing store optimisation and digitalisation programme continues to be key. The higher level of store sales has been achieved with 2% more commercial space and 2% less stores than in 2022. In 2023 gross new space increased 4.5%.

In 2023, Inditex opened stores in 41 markets. During the year, Zara opened its first store in Cambodia. The group remained very active in store optimisation activities (192 openings, 231 refurbishments which include 84 enlargements and 315 absorptions). At the end of FY2023 Inditex operated 5,692 stores. The number of stores by concept is included in Annex IV.

Online sales

Online sales also grew satisfactorily at 16% to reach €9.1 billion.

Customer engagement remains very high. Active App’s reached 152 million. Online visits in FY2023 have grown 10% to 6.5 billion visits. The Group has 251 million followers on social media.

Sales by concept

Net sales by concept in 2023 are shown in the table below:

Sales by geography

Store and Online sales by geographical area are shown in the table below:

Strong execution in 2023

In 2023, the execution of the business model was very strong. Gross profit increased 11.9% to €20.8 billion. The gross margin reached 57.8% (+77 bps).

The tight control of operations and the implementation of efficiencies has resulted in operating expenses growth of 10.0%, below sales growth. Including all lease charges, operating expenses grew 1.25 percentage points below sales growth.

Including all lease charges, rental expenses grew 8%.

EBITDA reached €9.9 billion (+13.9%), EBIT came to €6.8 billion (+23.4%). As a reminder, in FY2022, Inditex reported a provision for expected expenses for FY2022 in the Russian Federation and Ukraine of €231 million under Other results.

A breakdown of financial results can be found in Annex VI.

Results from companies consolidated by the equity method came to €72 million.

PBT increased 28.2% to €6.9 billion. The breakdown of PBT by concept is shown below:

Net income increased 30.3% versus 2022 to €5.4 billion.

Given the strong execution of the business model, lease adjusted funds from operations grew 22.2% and cash from operations grew 37.2%.

*The cash lease payments fixed charge has been added back.

The net cash position grew 13.3% to €11.4 billion.

Due to the robust operating performance and the normalisation in supply chain conditions, inventory was 7% lower as of 31 January 2024 versus the same date in 2023. Initial Spring/Summer collections are considered to be of high quality.

Capital expenditure for FY2023 came to €1.87 billion, of which €240 million relates to extraordinary capex linked to multiyear projects.

Dividends

Inditex’s dividend policy consists of a 60% ordinary payout and bonus dividends. For FY2023, the Board of Directors will propose at the AGM a dividend increase of 28% to €1.54 per share, composed of an ordinary dividend of €1.04 and a bonus dividend of €0.50 per share. The dividend will be made up of two equal payments: On 2 May 2024 a payment of €0.77 per share (ordinary). On 4 November 2024 a payment of €0.77 per share (€0.27 ordinary + €0.50 bonus).

Strategic initiatives: To the next level

Inditex continues to see strong growth opportunities. Our key priorities are to continually improve the product proposition, to enhance the customer experience, to increase our focus on sustainability and to preserve the talent and commitment of our people. Prioritising these areas will drive long-term organic growth.

The flexibility and responsiveness of our business in conjunction with in-season proximity sourcing allows a rapid reaction to fashion trends and a unique market position. Our business model has great potential going forward.

The growth of the Group is underpinned by the investment in stores, the advances made to the online sales channel and the improvements to the logistics platforms with a clear focus on innovation and technology. Sustainability is a keypart of the strategy.

In recent years, we have seen very strong progress of our unique business model and a material increase in differentiation through efficiencies in all areas of our operations that will result in an enhanced customer experience.

In 2022-2023, Inditex experienced significant growth in sales and productivity. Sales have grown 35% in constant currency in the period.

To take our business model to the next level and extend our differentiation further we are developing a number of initiatives in key areas for the coming years.

Product Proposition

We will continue focusing on the creativity, quality and design of all our products and reinforcing the commercial initiatives of all our concepts. Zara Woman The Leather Edition, Massimo Dutti Venetian Veil, Pull&Bear the Summit, Bershka TBTailoring, Stradivarius Poplin, Oysho Back to training and Zara Home Linens are just some of the proposals that will be available throughout 2024.

The collections show our strong commitment to creativity, with a team of 700 designers and a 630-person prototype team utilising a meticulous design process that attends to every small detail of our garments and collections, while striving to provide quality fashion to more and more customers around the world.

Customer experience

We will continue to offer the best shopping experience to our customers, both in our stores and on our online platforms. Regarding our stores, Zara will launch in new locations (Zara Palazzo Verospi Roma, Hamburg-Überseequartier, The Grove-Los Angeles and Caesars Palace-Las Vegas). Additionally, we will make important enlargements and refurbishments in some of our most emblematic stores (Zara Corso Vittorio Emanuele Milan and Zara Nanjing Road Shanghai).

Massimo Dutti will open a store in the US at Aventura Mall, Miami and Oysho will open its first store in Germany (Hamburg) in 2024. In India, Bershka will open its first store in Mumbai Palladium, and Zara Home will open in Bangalore.

In terms of new markets in 2024, our concepts have opened their first stores in Uzbekistan.

Over 2024, we expect to reopen around 50 Inditex stores in Ukraine.

Regarding our online experience, we will start weekly livestreaming services in the US and UK over 2024. The Group continues to explore new ways of communicating in order to improve the customer experience, via channels such as Shuffle for Pull&Bear.

We continue introducing the new security technology in our stores. This new technology provides a significant improvement in customer experience, facilitating interaction with our products and improving the purchasing process.

The new system will be fully operational in Zara in 2024. It will be progressively implemented in all the concepts and will be the basis for us to continue deepening the digitalisation of stores and their integration with online platforms in the coming years.

Sustainability

In terms of circularity, the Zara Pre-Owned platform is currently available in 16 European markets, and will reach new relevant markets, starting with the United States. Through this platform, we will continue helping our customers to extend the life cycle of their Zara garments through donation, repair or resale.

Regarding innovation, our Sustainability Innovation Hub is currently working with more than 350 start-ups. Some of these projects are now contributing to our current collections. An example of this is LOOPAMID® x ZARA. ZARA Studio has developed a single-material jacket made entirely with LOOPAMID®, a polyamide created entirely from textile waste. We have also seen commercial collaborations with CIRC. Furthermore, we have recently strengthened our commitment to Infinited Fiber with a direct investment in the capital of the company.

People

We will continue to promote the talent and commitment of our teams in order to reinforce our attractiveness as a benchmark employer.

Hola! is our welcome training program for everyone joining a Zara store for the first time. This is an itinerary for the first 4 weeks, combining hands-on and digital sessions on our Tra!n platform. We highlight the figure of Zara Coach: the person in charge of welcoming, guiding, supporting and involving the rest of the team during the process. The Hola! programme is already available in 50 markets, where we have about 2,800 Zara Coaches so far.

In addition, throughout the 2023 financial year, more than 12,700 people have been promoted, resulting in 72% of the Group's vacancies being filled internally. Additionally, 2.8 million hours of training have been provided to the teams.

Outlook: Strong commitment to profitable growth

Inditex operates in 213 markets with low share in a highly fragmented sector and we see strong growth opportunities. To meet the current strong demand, which builds on the significant growth of the business in 2022-23, we are taking a number of initiatives.

Optimisation of stores is ongoing. We expect strong sales productivity in our stores going forward. The growth of annual gross space in the period 2024-2026 is expected to be around 5%. Inditex expects space contribution to sales to be positive in this period, in conjunction with a strong evolution of online sales.

For 2024, we are planning investments that will scale our capabilities, obtain efficiencies and increase our competitive differentiation to the next level. We estimate ordinary capital expenditure of around €1.8 billion in 2024. This investment will be mainly dedicated to the optimisation of our commercial space, its technological integration and the improvement of our online platforms.

In view of the strong future growth opportunities, Inditex is implementing a logistics expansion plan in 2024 and 2025. This extraordinary two-year investment programme focused on the expansion of the business allocates €900 million per year to increase logistics capacities in each of the 2024 and 2025 financial years. These investments will have the highest standards of sustainability and use the most up-to-date technology. Below are the main investments:

/ Zara: New 286,000 m2 distribution centre Zaragoza II

/ Zara: Increased distribution centre capacity of 123,000 m2 in Lelystad (Netherlands)

/ Bershka: New 116,000 m2 distribution centre in the Valencia region

/ Tempe: New 141,000 m2 distribution centre in in the Valencia region

Most of these projects will be operational as early as the second half of 2025. The objective of this extraordinary logistics plan is to strengthen Inditex's capabilities to address strong growth opportunities in the medium and long term at a global level.

At current exchange rates, Inditex expects a -1.5% currency impact on sales in 2024.

For 2024, Inditex expects a stable gross margin (+/-50 bps).

Strong start to 2024

Spring/Summer 2024 collections have been very well received by our customers. Store and online sales in local currency, adjusted for the calendar effect of an extra trading day in February due to the leap year, increased 11% between 1 February and 11 March 2024 versus the same period in 2023.

2024 corporate calendar

Inditex expects to release interim results for FY2024 on the following dates:

Interim three months: 5 June 2024
Interim half year: 11 September 2024
Interim nine months: 11 December 2024
FY2024: March 2025 (tbc)