Home NEWS International Inditex’s net profit down 70% in 2020

Inditex’s net profit down 70% in 2020

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11 March 2021, Spain.  Inditex ( Spain) which owns several clothing brands including Zara, Pull and Bear and Bershka said its net profit fell a steeper-than-expected 70% in 2020 to 1.1 billion euros ($1.31 billion), after a year of global lockdowns and dampened demand caused by the COVID-19 pandemic.

Zara owner Inditex forecast stronger sales as soon as lockdowns are lifted. Inditex  expects almost all of its 6,829 shops worldwide to be open by mid-April based on current estimates of when restrictions are due to ease, with around 15% of its stores still closed as of March 8. But Isla also emphasised that online sales would be key to Inditex’s strategy going forward, with just under a third of total sales last year coming from its website and app, up from 14% in 2019. 

 

“As soon as the stores reopen, the level of sales becomes very healthy,” 

Chairman Pablo Isla

“We have been able to offer our clients the products they would have found in store, online, thanks to our integrated stock offering,” Isla said in a press conference. She added “The spring collection was “strong” and “bright”, Isla said, adding: “It’s full of bright colours, very optimistic.”

Inditex’s radio frequency technology, attached as a chip to the alarm on clothing to keep track of stock, was rolled out across all its brands this year, allowing customers to identify from the app whether an item is in stock in a nearby store, and pushing inventory down 9% on the year.

Online sales across all brands have been rolled out in ‘practically 100%’ of markets the retailer operates in, Isla said, adding that in China, brands oriented towards younger consumers like Bershka and Stradivarius were now selling exclusively online. Excluding its five significant markets with stores still closed, Germany, Brazil, Greece, Portugal and Britain, Inditex said like-for-like sales in the first week of March grew 2%.

Fourth-quarter net profit fell 53% to 435 million euros out of sales of 6.3 billion euros as restrictions on shopping came back into force across much of Europe during the end-of-year holiday season, the company said. Around 15% of its shops worldwide were still closed due to COVID-19 restrictions as of March 8, Inditex said in a statement. Total sales for the year were down 28% to 20.4 billion euros, with a 25% drop in the fourth quarter at Inditex, which is the owner of eight brands including Massimo Dutti.

Inditex has so far closed 751 of the 1,200 stores it plans to shut by the end of the year in favour of flagship locations from which it can serve both online and instore customers. Its rival H&M reported an 88% drop in pre-tax profit in the 12 months to November in its full-year results in January, with inventory slightly up from last year. The company will report its 2021 first-quarter results at the end of March.