Zara owner Inditex sees sales and profits leap despite Ukraine hit: reaction

Zara owner Inditex has posted a jump in first-quarter sales and profits despite taking a €216 million (£185m) hit from Russia’s invasion of Ukraine and fresh Covid lockdowns in China.

The fashion giant said the provision would cover costs for the year of the temporary closure of all its stores and online sites across Ukraine and Russia.

It nevertheless saw net income leap 80 per cent to €760m in the three months to April 30 after sales jumped 36 per cent to €6.74 billion as strong growth globally also offset the impact of Covid restrictions across its 67-strong chain in China.

The Spanish group said trading was boosted by the strong return of customers to stores since pandemic restrictions have lifted. However, this meant online sales eased back, falling by 6 per cent, year on year.

The firm said the second quarter has seen sales rise 17 per cent so far since the start of May, although growth has eased to 13 per cent in the last two weeks.

Inditex said that without the Ukraine and Russia provision, profits would have been some €940m in the first quarter.

Laura Hoy, equity analyst at investment platform Hargreaves Lansdown, said: “Zara-parent Inditex’s first-quarter results proved consumers aren’t ready to give up on their looks just yet. Despite the ever-present cost of living crisis, people continued to flock to Inditex stores.

“The group’s own costs rose at a slower pace than sales, which padded profits and set the group up nicely for the year ahead. Confident is the best descriptor of management’s tone in today’s update, with a special dividend now on the table.”

People queuing for Zara in Edinburgh after lockdown restrictions eased in spring 2021. Picture: Conor Riordan/PA

She added: “It was unsurprising to see inventory levels rise significantly as the group, like many of its peers, shores up its warehouses to deal with supply chain issues. Stock availability is a key challenge in the retail world right now, and Inditex seems to have it mostly under control.

“However this inventory-stocking has the potential to backfire if economic conditions continue to worsen and customers eventually close their wallets.”

Inditex halted trading across its 79 stores and online sites in Ukraine on February 24, then temporarily closed its 502 shops and websites in Russia from March 5.

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