Zara owner Inditex claims store sales are recovering with a slow return to profit

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The owner of fashion retailer Zara, Inditex, returned to a quarterly profit during the three months from May to July, despite there being a 31% fall in sales, with the COVID-19 crisis keeping consumers away from shopping districts.

Inditex, which also owns the Massimo Dutti and Bershka brands, stated that 98% of its stores had successfully reopened and that the current trade cycle shows a progressive return to normal operations, as online sales continue to rise sharply with store sales also recovering gradually.

In the current quarter, Zara’s store and online sales were at a constant rise, yet it was still 11% below from the same period in 2019.

Inditex shares rose by 5% on Wednesday, thus adding to the gains that were registered on Tuesday after their Swedish rivals H&M beat quarterly profit forecasts.

Shoppers have slowly started to shift their income towards fashion, with stores reopening after the shutdowns.

JP Morgan estimates that continental Europe fashion sales went down by an average of 15% during July compared to May’s 42% drop.

During the second-quarter, Inditex reported a net profit of €214 million, outshining the €96 million mean forecast from Refinitiv’s SmartEstimate model.

Inditex saw a 74% increase in online sales during the first half, following a trend that many apparel retailers worldwide have followed, with shoppers opting to buy from the comfort of their own homes with stores being closed and there being restrictions on movement.

Zara’s app has also shifted its style to those that are working from home and to more comfortable styles, rather than several clothing suited for parties and events, with it showcasing wide trousers and flat shoes with the models doing more relaxed activities such as riding bicycles.

During the first half, Zara reported a net loss of €195 million euros with sales going down by 37%.

The company stated that it would have reported a profit had it not booked a €308 million charge related to its integration of its store and online platforms, with this cost helping to drive sales towards its online store.