Inditex third-quarter sales rise despite cost inflation, Russian operations charge

By Scott Kanowsky 

Investing.com -- Industria de Diseno Textil SA (BME:ITX) reported a double-digit increase in third-quarter sales, as the Spanish retail giant was boosted by a jump in online and in-store demand that helped offset higher input expenses and an extra charge from the termination of its Russian operations.

Sales during the three months to October 31 rose by 11% to €8.2 billion (€1 = $1.0635), which the Zara owner partly credited to in-store traffic that ticked up "markedly." Online sales continue to progress "satisfactorily," Inditex added. Net sales bumped up by 19% over the nine-month period to €23.06B, marginally topping estimates.

But the cost of accruing its clothing goods also ticked up by 13% to €3.2B, in a sign of inflationary pressures that have contributed to what chief executive Oscar García Maceiras called a "current challenging context." However, the group said its cost controls remained "rigorous."

The company booked a charge of €14M in the third quarter as well, adding on to a prior expense of €216M recorded in the first three-month period of the fiscal year. In a statement, Inditex said it estimates that the charge "sufficiently covers the impact" from the winding down of its business activities in Russia following the outbreak of the war in Ukraine.

Net income during the three-month period came in at €1.3B. Meanwhile, the figure moved up by 24% to €3.11B over the nine-month timeframe, slightly ahead of Bloomberg consensus estimates.

Meanwhile, the group's autumn/winter collections have been "very well received," with that demand helping push sales higher by 12% to begin fourth-quarter trading from November 1 to December 8.

Analysts at Jefferies said in a note to clients that the third-quarter results were "upbeat" and described fourth-quarter returns as "very strong" so far.

Shares in Inditex rose in early trading on Wednesday.