Inditex (Financials)
Financial overview
- Sales jumped 10.4% to €35.9bn (£31.2bn) in FY2023
- Online sales rose 16% to €9.1bn (£7.9bn)
- Gross profit margins grew from 57.0% to 57.8%
- Pre-tax profits rose to €6.9bn (£4.6bn)
Inditex once more delivered record sales, rising 10.4% to €35.9bn (£31.2bn) for the year ending 31 January 2024 (FY2023) or 14.1% in constant currency.
Inditex chief executive Óscar García Maceiras commented “Inditex’s performance in 2023 has been excelllent. Our teams have been able to take advantage of the opportunities to keep growing profitably. We are investing to drive future growth and continue to offer an attractive renumeration to shareholders.”
The fashion retailer said its collections had been “very well received” by its customers with sales both on in store and online “very satisfactory”. Online sales jumped 16% on the previous year to €9.1bn (£7.9bn).
Sales were positive in all geographic locations, with Europe (excluding Spain) still representing the bulk of its sales, with total revenue share rising from 47.5% to 48.7% in FY2023.
Inditex had recorded revenues of €32.6bn (£27.9bn) in FY2022, rocketing 17.5% on the previous year (or 18% in constant currency).
All concepts grew in the latest financial year, with sales in Zara (which combines Zara and Zara Home) rising 9.6% to €26.1bn (£22.6bn), representing 72% of group turnover. Oysho delivered the strongest year-on-year growth, jumping 19.4% to €0.7bn (£0.6bn).
Gross profits rose 11.9% to €20.8bn (£18.0bn) with gross margins climbing from 57.0% to 57.8% in FY2023. Inditex said its control of operating expenses has been “rigorous”, with operating profits increasing from €5.5bn (£4.7bn) to €6.8bn (£4.7bn).
“Stringent control” had seen group operating profits leap from 15.4% to 16.9% to €5.5bn (£4.7bn) in FY2022 with operating expenses growing 15% year-on-year.
Group pre-tax profits surged to 28.2% to €6.9bn (£5.9bn) in the latest financial year, having risen to €5.4bn (£4.6bn) in FY2022.
UK financial analysis
To simplify its corporate structure, Inditex Group carried out a merger of its UK retail companies in October 2022. Zara UK purchased the trade and assets of the UK arms of Massimo Dutti, Bershka, Pull and Bear, Stradivarius, and Zara Home on 1 October 2022. On the same date, Zara UK changed its name to ITX UK Limited.
ITX UK will file at Companies House for FY2023 at the near the end of 2024. UK sales for FY2023 are therefore Retail Navigator estimates.
UK sales surged 37.4% to £1.50bn for the year ending 31 January 2023 (FY2022). Overall UK store numbers rose to 105 from 102, with 6 new store openings, three relocations and three store closures. It opened its new flagship Battersea Power Station store during the year.
In FY2021, total UK sales rose 74% year-on-year to £1,093m due to the described acquisition, although the retailer noted that trade had been significantly affected in its first quarter by government restrictions temporarily shuttering stores.
UK gross margins are lower than the group but rose in the latest financial year to 48.4%.
In FY2021, gross margins had grown against the previous year to 47.6% with pre-tax profit margins also rising healthily from 3.0% to 5.5% year-on-year.
“Rigorous” control of its operating expenses saw UK operating profits climb from £61m to £127m in FY2022 with operating margins rising from 5.6% to 8.5%. UK pre-tax profit margins grew at a similar rate, rising from 5.5% to 8.5% in the latest financial year.
Ecommerce
The Inditex Group had an immature ecommerce business prior to the pandemic, with ecommerce sales representing around 10% share in FY2016.
However, the group has since invested in its digital capabilities, accelerating during the pandemic with online share lifting to around 32% share in FY2020. It has since decreased with stores reopening post-pandemic, settling at 25.5% share in FY2021.
Online sales “grew satisfactorily” in FY2022, up 4% to reach €7.8bn (£6.7bn). Inditex said its customer engagement “remains very high”.
Ecommerce sales continued to grow in the latest financial year, rising 16% to €9.1bn (£7.9bn). Inditex said active app users reached 152 million with online visits growing 10% to 6.5 billion visits in the year.
Inditex does not split out its UK online sales, with all UK figures Retail Navigator estimates.
Employees
Employee numbers for FY2023 will be updated when the group publishes its annual report later in the year.
The Inditex Group had seen its FTE numbers rise significantly to FY2019, reaching just over 83,000. When the pandemic hit, employee numbers were scaled back, falling to some 72,000 in FY2020.
This has since risen to slightly to 72,620 in in FY2021 with the retailer stating, “with the gradual return to normality after the pandemic, we have reinforced store recruitment at peak sales times of the year.”
In FY2022, its FTEs fell back to around 67,650 with the closure of its business in Russia.
Its sales per employee sat at a healthy £328,240 in FY2021. With the records sales gains in FY2022, this rose substantially to around £412,000.
Within the UK, employee numbers rose from 3,663 at the end of FY2021 to 4,685 in FY2022 due to the transfer of employees of the merger of companies. UK sales per employee are more or less in line with the group, rising to £320,500 from £298,435 in FY2022.
Inditex Group’s staff costs to sales ratio has remained relatively static over the last few years, only rising with the reduction in sales in FY2020 to 16.5%, but since coming down to 15.1% in FY2021, falling to 14.6% in the latest financial year.
Its UK staff costs to sales ratio runs higher than the group, rising from 29.8% in FY2021 to 32.1% in FY2022.
Forecast
Inditex said it continues to see “strong growth opportunities”. Sales during the period 1 February to 11 March 2024 rose 11%
Retail Navigator forecasts that by FY2028, group sales will reach around £44bn with online representing a 26% share of overall trade.
