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Inditex, owner of the Zara fashion brand, on Wednesday unveiled a 10 per cent rise in full year net earnings to €3.16bn, underlining the strength of the “fast fashion” business model pioneered by the world’s largest clothes retailer.
Net sales rose 12 per cent to €23.3bn, while same-store sales increased by 10 per cent year-on-year – up from 8.5 per cent in 2015. The results were broadly in line with analyst expectations.
The Spanish group noted it achieved “positive same-store sales growth in all geographies and across all brands”. The annual dividend is set to increase by 13.3 per cent to €0.68 per share.
Inditex, which owns retail chains such as Zara, Massimo Dutti and Pull & Bear, said sales growth had continued apace in the new financial year, with store sales rising 13 per cent between February 1 and March 12 on constant-currency terms.
Based in Arteixo, a small town in north-west of Spain, Inditex is the biggest fashion retailer in the world by market value. It produces its wares quickly and in small batches, allowing it to respond instantly to new fashion trends and changes in customer taste.
The business model is underpinned by the group’s decision – unusual in the textiles industry – to produce many of its clothes in Spain, Portugal and other high-cost countries close to headquarters. This allows Inditex to turn around new designs faster than its rivals, often in the space of just a few weeks. But it also leaves the group heavily exposed to currency shifts, with production costs geared towards the euro but the bulk of sales generated outside the single currency zone.
Inditex’s recent performance has been boosted by a flurry of store openings and a concerted push into online sales.
The group said it opened 279 new outlets over the course of 2016, taking the total to 7,292. It entered five new markets – New Zealand, Vietnam, Paraguay, Nicaragua and Aruba – and continued to launch new online sales platforms in markets around the world.
Image via Reuters