What's going on?
Inditex reported mixed results on Wednesday, but at least shoppers flocked to the world’s biggest clothing retailer no matter if they were working from home or hitting the town.
What does this mean?
Inditex managed to reopen most of its roughly 7,000 stores last year, as countries around the world let their eager shoppers roam free. But then Omicron cropped up, bringing about new restrictions that the Spanish retailer – owner of Zara, Bershka, and Massimo Dutti – reckons cost it around $440 million in profit last quarter alone.
Luckily, Inditex had a year of solid sales to fall back on: locked-down shoppers spent so much that online sales made up over a quarter of the brand’s total sales in 2021. And overall, the retailer boosted sales by 36% last year from the one before, bringing them back to pre-pandemic levels and almost tripling its profit too.
Why should I care?
For markets: More issues than Vogue.
Analysts seem fussier than even the most glamorous of fashionistas: Inditex’s bumper yearly growth still came in below their expectations. They won’t like what’s coming up, either: Inditex closed its Russian stores earlier this month after the country invaded Ukraine, which doesn’t bode well for business. After all, it has more stores there than in any country besides Spain, and Russian sales make up nearly 10% of the retailer’s operating profit. Throw in that rising Covid cases are threatening its business in China too, and investors sent Inditex’s shares down after the news – leaving them down more than 25% over the past year.
Zooming out: Now that’s a trend.
Inditex’s biggest rival also gave a results update this week: H&M reported its sales were up 23% last quarter from the same time the year before. But just like Inditex, the world’s second-biggest fashion retailer might have trouble up ahead: analysts at Royal Bank of Canada cut their 2022 profit estimates for the retailer by 10%, blaming the current and potential impact of war in Europe on its sales.