Zara owner Inditex reports surge in annual profit as sales hit record high

By Scott Kanowsky 

Investing.com -- Zara-owner Inditex (BME:ITX) posted a 29% jump in annual profit despite a slowdown in top-line returns in the final quarter, thanks to "historic" growth in sales both in its physical stores and online.

The Spanish fast fashion retailer, now helmed by chair Marta Ortega, daughter of business magnate Amancio Ortega, said its collections throughout the year were "very well received" by customers.

As a result, sales increased by 18% at constant currencies compared to 2021 to a record €32.6 billion, above Bloomberg consensus estimates of €32.48B. Traffic at its locations improved "markedly," Inditex said, adding that sales online of €7.8B also topped an all-time high reached last year.

When accounting for the impact of the closure of its operations in Russia following the outbreak of the war in Ukraine, sales moved up by 17.5%.

Meanwhile, operating costs were higher by 15%, reflecting an uptick in input expenses throughout 2022. Analysts say Inditex has attempted to offset these pressures with hikes in the prices of their items.

Earnings before interest and taxes came in at €5.5B for the year, roughly in line with Bloomberg consensus forecasts.

But in the fourth quarter, operating income growth slowed to 14.1%, as cost of sales surged by more than a third. Analysts at Jefferies said the quarterly results were still broadly in line with expectations.

The company noted that sales in the current trading period from February 1 to March 13 improved by 13.5% versus the same period in 2022. The Jefferies analysts called the figures "remarkably strong" in top-line terms, adding that this performance could be supported by investments in logistics capacity and store expansion.

Shares in Inditex dipped in early European trading on Wednesday.