Interim Half Year 2024 Results

/ In 1H2024, Inditex continued with a very robust operating performance due to the creativity of the teams and the strong execution of the fully integrated store and online business model.

/ Óscar García Maceiras, CEO, “The design and quality of our fashion proposition and the experience we offer our customers are, together with the efficiency and increasing sustainability of our operations, the keys to the solidity of these results. Our fully integrated model continues to generate opportunities for profitable growth across all concepts, regions and channels."

/ The Spring/Summer collections have been very well received by our customers. Sales grew 7.2%, to reach €18.1 billion, showing very satisfactory development both in stores and online. Sales were positive in all concepts. Sales in constant currency grew 10.2%.

/ Gross profit increased 7.5% to €10.5 billion. The gross margin reached 58.3% (+19 bps versus 1H2023).

/ All expense lines have shown a favourable evolution. Operating expenses increased 6.8%, below sales growth.

/ EBITDA increased 8.1% to €5.0 billion.

/ EBIT increased 11.9% to €3.5 billion and PBT 10.6% to €3.6 billion.

/ Net income increased 10.1% to €2.8 billion.

/ The robust operating performance has resulted in strong cash flow generation.

/ The FY2023 final dividend of €0.77 per share will be paid on 4 November 2024.

/ Autumn/Winter collections have been very well received by our customers. Store and online sales in constant currency between 1 August and 8 September 2024 increased 11% versus the same period in 2023.

Interim Half Year 2024: Very strong operating performance

In 1H2024, Inditex continued with a very robust operating performance due to the creativity of the teams and the strong execution of the fully integrated store and online business model. The Spring/Summer collections have been very well received by customers. Sales grew 7.2% to reach €18.1 billion, showing very satisfactory development both in stores and online. Sales were positive in all concepts. Sales in constant currency grew 10.2%.

In 1H2024, openings have been carried out in 34 markets. At the end of the period Inditex operated 5,667 stores. A list of total stores by concept is included in Annex I. Net sales by concept in 1H2024 and 1H2023 are shown in the table below.

Inditex continues to roll out its global sales platform. Store and online sales by geographical area are shown in the table below.

In 1H2024, the execution of the business model was very strong. Gross profit increased 7.5% to €10.5 billion. The gross margin reached 58.3% (+19 bps).

All expense lines have shown a favourable evolution. Operating expenses increased 6.8%, below sales growth. Including all lease charges, operating expenses grew 102 bps below sales growth.

EBITDA increased 8.1% to €5.0 billion.

EBIT increased 11.9% to €3.5 billion and PBT 10.6% to €3.6 billion.

Annex II includes a breakdown of the Financial results.

The tax rate applied to the 1H2024 results is the best estimate for fiscal year 2024 based on available information.

Net income increased 10.1% to reach €2.8 billion.

The robust operating performance has resulted in strong cash flow generation. Funds from operations before corporate income tax came to €4.4 billion in 1H2024, 9% higher. Due to timing differences in tax refunds, funds from operations came to €3.5 billion.

The net cash position grew 3.5% to €10.9 billion at the end of 1H2024 versus the same period last year.

Due to the robust operating performance over 1H2024 inventory was 1.7% lower as of 31 July 2024 versus the same date in 2023. Inventory is considered to be of high quality.

2H2024

The Autumn/Winter collections have been very well received by our customers. Store and online sales in constant currency between 1 August and 8 September 2024 increased 11% versus the same period in 2023.

Outlook

Inditex continues to see strong growth opportunities. Our key priorities are to continually improve the fashion 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 growth. To take our business model to the next level and extend our differentiation further we are developing several initiatives in all key areas for the coming years.

The creativity of our teams and the flexibility of the business model in conjunction with in-season proximity sourcing allows a swift reaction to customer demand. This situation results in a unique market position which provides our business model with great growth potential going forward.

Inditex operates in 214 markets with low share in a highly fragmented sector and we see strong growth opportunities. We expect increased 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.Optimisation of stores is ongoing.

At current exchange rates, Inditex expects a -3.0% currency impact on sales in 2024. In 2024, Inditex expects a stable gross margin (+/-50 bps).

For 2024, we are making investments that are scaling our capabilities, generating efficiencies, and increasing our competitive differentiation to the next level. We estimate ordinary capital expenditure of around €1.8 billion.

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.

/ Product proposition

We continue focusing on the creativity, innovation, design and quality of all our collections and integrated sales channels, while reinforcing the commercial initiatives of all our concepts. Zara Woman Collection, Zara Home Stationery, Massimo Dutti Studio, Pull&Bear Winter Trends, Bershka Denim Core, Stradivarius The Beauty of Routine and Oysho Yoga 2024 are just some of the creative proposals available through the second half of 2024.

/ Customer experience

We offer the best shopping experience to our customers both in our stores and on our online platforms.

The new store design for Zara created by our Architectural Studio is featured in openings, enlargements or relocations such as Valladolid Constitución, Liverpool One, Thessalonica Tsimiski, Eindhoven Rechtestraat, Greenwich Connecticut, Riyadh Al Nakheel and Bangalore Mall of Asia.

We are optimising our store presence with important openings, enlargements and relocations in all concepts, with key examples like Bershka London Oxford Street, Massimo Dutti Miami Aventura Mall, Stradivarius Bogota Calle 82, Pull&Bear Paris Passage du Havre, Zara Home Milan Palazzo Ferrania and Oysho Lima Jockey Plaza.

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.

A significant initiative for this season will be the arrival in the coming weeks of our Zara Streaming experience in key markets such as Spain, USA, France, Italy, Germany, UK, Ireland, The Netherlands and Canada following the launch in the Chinese market in November 2023. We will continue extending the Streaming experience on our platforms to other markets over the following months.

/ Sustainability

As part of our continuous effort to explore alternatives for new raw materials, in July Inditex announced an equity investment in Galy, a US startup that has developed innovative technology for growing cotton in a lab from cotton stem cells.

In August 2024, we launched our second CIRC X Zara collection, designed by Zara Studio and made from textile waste. The collection is made up of garments with clean, timeless silhouettes and composed exclusively of CIRC Lyocell.

Both initiatives are part of our Sustainability Innovation Hub, a platform created in 2020 to promote the use of new technologies, materials and processes to minimise the environmental impact of our products, helping us move towards more sustainable and circular solutions. Our Sustainability Innovation Hub is currently working with more than 350 startups.

In terms of circularity, the Zara Pre-Owned platform, currently available in 16 European markets, will reach the United States by the end of October 2024. Through this platform, we will continue helping our customers to extend the life cycle of their Zara garments through donation, repair or resale.

/ People

We continue with our firm commitment to the talent of our people with the aim of remaining a benchmark employer as well as looking for a positive impact on our communities. In this line, Inditex has obtained the ‘Top Employers’ seal in 12 of our most relevant markets, a distinction that certifies companies that put their people at the centre, creating work environments that generate a sense of belonging, in which everyone feels accepted, has the freedom to express their ideas and is heard.

In terms of Woman in Tech, we have carried out initiatives such as ‘Technovation’, a global programme in which more than 30,000 young women from 50 countries have participated this year, empowering them to tackle social and environmental problems in their communities through technology.

Dividends

The FY2023 final dividend of €0.77 per share will be paid on 4 November 2024.