Profit growth is slowing, but Zara owner Inditex is still doing better than the competition
Madrid (AFP) - Spain’s retail giant Inditex saw slower growth in 2018 as the Zara owner invests heavily in developing online sales, the group and analysts said.
The company, whose brands include Massimo Dutti, Pull&Bear, Bershka and Oysho, said Wednesday net profit rose 2 percent to 3.44 billion euros ($3.89 billion) and sales increased 3 percent to 26.15 billion euros, below analyst forecasts.
But it still did better than its main rivals, Sweden’s H&M and Japan’s Fast Retailing, both of which posted sales below the 20-billion-euro mark.
But Inditex confirmed its trend of slower growth as its profit increase slowed from 15 percent in 2015 to 7 percent in 2017.
Shares were down 3.73 percent to 25.29 euros at midday on Wednesday despite a pledge by the group to increase dividends.
Rafael Sambola, economics professor at Barcelona’s EADA Business School, said the dividend increase was “a way to make the shares attractive” as the group awaits better results from its online sales.
“This is a company that has made great strides, and obviously there is now a moment of pause,” he told AFP.
Inditex underscored the effects of exchange rates, saying that without these, its profit would have lept 12 percent.
For Neus Soler, a textiles expert at Catalonia’s Open University, the growth slow-down is also due to the group’s digital transformation, which needs a lot of investment.
She told AFP Inditex’s main objective is to link online sales and those in stores so that “customers can look at the product on the internet and then buy or collect it in the store.”
“And vice-versa… check the quality, colours, which they may not see so well on the screen, and then buy it calmly at home.”
In order to do this, Inditex said it invested 1.6 billion euros in 2018 with the aim of developing online sales in all its markets and brands by 2020.
“We operate a unique global platform that fully integrates stores and online and offers a huge growth potential,” Inditex CEO Pablo Isla said at an analysts’ conference.
Online sales increased 27 percent to 3.2 billion euros in 2018.
The group’s operating costs also rose 4 percent as it increases store space and the number of employees as part of a strategy to privilege bigger, flagship shops in city centres.