Inditex Earnings Beat Analyst Estimates as Zara Stores Reopen

Inditex SA reported better-than-expected as the Zara owner reopened almost all its stores and had buoyant growth.

  • Earnings of 1.5 billion euros ($1.8 billion) before interest, , depreciation and amortization in the six months through July were ahead of the average analyst estimate of 1.35 billion euros.

Key Insights

  • One of the best ways to gauge how retailers are navigating the pandemic is inventory levels. Inditex managed to reduce its stock-in-trade by 19% at the end of the first half, showing how its flexible purchasing agreements allow the company to quickly adapt to changes in demand.
  • Online revenue surged 74%. Inditex has been leaning on e-commerce to mitigate the decline in in-store revenue. The company aims to get more than a quarter of its revenue from that avenue by 2022.
  • The results show continued gradual improvement after the company reported its first loss on record in the first quarter. Sales fell 31% in the second quarter after a 44% drop in the first. Revenue fell 11% in the first weeks of the third quarter, excluding currency shifts.

Market Reaction

The shares have dropped 24% this year. They gained 5.2% Tuesday after rival Hennes & Mauritz AB reported higher-than-expected quarterly earnings.

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