ZARA owner Inditex reported a strong start to summer trading on Wednesday as currency-adjusted sales grew 11.5% in May, handily beating analyst expectations, even as Iran war inflation worries dent consumer confidence.
The strong sales growth should help reassure investors the fast fashion giant, whose shares are down on the year, can weather the global turmoil and perhaps even benefit as some shoppers trade down from more expensive clothing brands.
Analysts had expected sales growth of 8% for May, the start of the company's second quarter. Inditex posted sales of €8.75 billion ($10.17 billion) over its February-to-April first quarter, up 8.8% in currency-adjusted terms.
Profitability improved too with the gross margin hitting 61.2% - up from 60.6% a year ago - in a sign the retailer has successfully protected profits despite higher raw material and freight costs. Inditex shares were expected to gain 2% to 4% at the open, traders said.
The retailer meanwhile stuck to a full-year outlook issued in March of a stable gross margin, a 5% increase in store space, and €2.3 billion in capital expenditure.
Zara has invested in new, bigger stores and boosted marketing to draw in new customers while increasing prices.
And in May it launched a new clothing collection with Puerto Rican pop and reggaeton superstar Bad Bunny, who wore custom Zara outfits during his NFL Super Bowl halftime show in February.
The first quarter is typically Inditex's smallest in terms of sales and profits. But it has been closely watched, given the war's impact on consumer confidence. And investors have been bracing for signs of strain at the $190 billion company, which also owns smaller brands including Massimo Dutti, Oysho, Bershka, and Lefties.
Shares in Inditex are down 6.5% since the start of the year. ($1 = 0.8605 euros) - Reuters
