Industria de Diseno Textil SA
MAD:ITX
Industria de Diseno Textil SA
In the bustling town of Arteixo, Spain, Industria de Diseno Textil SA, more widely recognized as Inditex, charts a remarkable course through the global fashion industry. Established in 1985 by Amancio Ortega, the company has redefined the way garments reach consumers through its innovative "fast fashion" model. By maintaining an extensive network of stores, predominantly under its flagship brand Zara, Inditex accelerates the journey from design sketches to retail shelves in record time, often a matter of weeks, compared to the months-long cycles typical in traditional fashion houses. This nimble approach, supported by centralized logistics and close relationships with suppliers, enables Inditex to respond swiftly to the ebb and flow of fashion trends, keeping the pulse of consumer desires at its fingertips.
The commercial engine of Inditex is powered not just by speed but also by a unique strategy that pivots around customer engagement and experience. Their integrated operations combine in-house design, a flexible supply chain, and a keen data-driven understanding of customer preferences. Stores act both as points of sale and data collection hubs, allowing Inditex to gather real-time insights on what’s selling and what’s not, feeding back into their design and production processes. This continuous loop between customer feedback and product offering crafts a competitive edge, allowing Inditex to curate collections that are both timely and aligned with market demand. By operating in this manner, Inditex not only captures the imagination of fashion enthusiasts worldwide but also cultivates a sturdy financial foundation that fuels its global expansion, keeping it at the forefront of the retail fashion industry.
Earnings Calls
In Q1 2024, Inditex reported robust sales growth of 7.1%, reaching €8.2 billion, and a 10.8% increase in net income to €1.3 billion. The company's gross margin stood at 60.6%, and EBITDA grew by 8% to €2.4 billion. Inditex's fully integrated business model and expansion strategies, including new openings in 28 markets and logistics investments of €900 million per year for 2024 and 2025, underpin this performance. The company expects a stable gross margin for the year and plans a 28% dividend increase to €1.54 per share【7:0†source】【7:3†source】【7:4†source】【7:8†source】.
Management
Oscar García Maceiras is a prominent Spanish executive known for his role as the CEO of Industria de Diseño Textil SA, commonly known as Inditex, which is one of the world's largest fashion retailers and the parent company of brands such as Zara, Pull&Bear, Massimo Dutti, Bershka, Stradivarius, Oysho, Uterqüe, and Zara Home. García Maceiras joined Inditex in 2021, bringing with him a wealth of experience from various sectors. Before his role at Inditex, he had a distinguished career in the banking and legal industries. With a background in law, he has held significant positions in major companies, providing him with an extensive understanding of corporate governance and management. As CEO of Inditex, García Maceiras focuses on enhancing the company's digital transformation, sustainability, and expansion strategies. Under his leadership, Inditex continues to adapt to the evolving retail landscape, emphasizing a more sustainable business model and the integration of digital technology in its operations. His appointment as CEO is seen as part of Inditex's strategic plans to strengthen its global presence and maintain its competitive edge in the fast-paced fashion industry. García Maceiras is recognized for his leadership skills and his ability to steer complex organizational changes effectively.
Amancio Ortega Gaona is a renowned Spanish business magnate, best known as the founder of the Inditex fashion group, which is most famous for its chain of Zara clothing and accessories shops. Born on March 28, 1936, in Busdongo de Arbas, Spain, Ortega is hailed as one of the most successful and influential figures in the global fashion industry. Ortega began his career in the clothing industry in the early 1960s while working as a delivery boy for a local shirtmaker. Observing the inefficiencies and high costs associated with traditional manufacturing and distribution, he nurtured a vision to streamline these processes. With an entrepreneurial spirit, Ortega founded Confecciones Goa in 1963, which produced quilted bathrobes. In 1975, he opened the first Zara store in La Coruña, Galicia, Spain, alongside his then-wife, Rosalía Mera. Zara's business model was revolutionary in the fashion industry, emphasizing quick turnaround of the latest styles at affordable prices, which came to be known as "fast fashion." This model spurred the rapid expansion of Zara and, subsequently, the entire Inditex group, which Ortega formally established in 1985. Under Ortega's leadership, Inditex grew to become the world's largest fashion retailer, encompassing several brands including Massimo Dutti, Pull&Bear, Stradivarius, and Bershka, among others. Ortega remained actively involved in Inditex until he stepped down as chairman in 2011, although he maintains a significant influence as its largest shareholder. Throughout his career, Amancio Ortega has been noted for his reserved and private nature, avoiding the public eye in stark contrast to many of his peers. Despite his low profile, Ortega has consistently ranked among the wealthiest individuals worldwide, as listed in various global rich lists.
Ignacio Izuzquiza Fernández is known for his role at Industria de Diseño Textil, S.A., commonly known as Inditex, a major Spanish multinational clothing company. He holds a significant position in the company, being responsible for financial oversight and strategic financial planning. Inditex is notably the parent company of popular fashion brands like Zara, Massimo Dutti, Pull&Bear, and Bershka, among others. Fernández's role involves ensuring the financial health and regulatory compliance of the company, contributing to its global expansion and market strategy. Known for his expertise in financial management and corporate strategy, he plays a crucial part in Inditex's decisions regarding investments, budgeting, and overall fiscal guidance. His work supports the company's reputation for financial stability and growth, aiding in its competitive position in the fast-paced retail industry.
James O'Shaughnessy does not appear to be a known executive officer or significant figure associated specifically with Industria de Diseno Textil SA (commonly known as Inditex), the parent company of brands like Zara, Pull&Bear, and Massimo Dutti. Therefore, I do not have information on him in relation to this company. If there are other details or companies you are referring to, please provide additional context. Otherwise, the response is FALSE.
Javier Monteoliva Díaz is the General Counsel and Secretary of the Board at Inditex (Industria de Diseño Textil S.A.), one of the world's largest fashion retailers. His role involves overseeing the company's legal department and ensuring compliance with legal and regulatory requirements. Monteoliva Díaz plays a pivotal role in the corporate governance of the company, advising the board of directors on legal matters and ensuring that decisions align with corporate policy and regulations. His expertise contributes significantly to Inditex's strategic direction and operational execution, particularly in navigating complex international markets and maintaining the company's reputation.
Begoña López-Cano Ibarreche serves as the Chief Human Resources Officer (CHRO) at Industria de Diseño Textil SA, commonly known as Inditex. Inditex is one of the world’s largest fashion retailers, renowned for its store chains like Zara, Massimo Dutti, and Pull&Bear, among others. Begoña López-Cano has extensive experience in the field of human resources and has been influential in managing and developing the workforce strategies for the company. Her role includes overseeing talent management, learning and development, and fostering a positive work culture across the global Inditex network. Throughout her time at the company, she has played a critical role in aligning the HR function with the strategic goals of the organization, ensuring that the group remains agile and responsive in the fast-paced fashion industry. Her leadership is noted for promoting diversity, sustainability, and employee engagement within the company.
Abel López Cernadas is an executive at Industria de Diseño Textil S.A. (Inditex), one of the world's largest fashion retailers, known for its flagship brand Zara among others. He has gained significant recognition within the company for his contributions to its financial and administrative sectors. Abel López Cernadas serves as Inditex's Chief Financial Officer (CFO) and is responsible for overseeing the financial operations of the entire group. His role involves strategic financial planning, risk management, and ensuring the financial health and integrity of the company. Under his leadership, Inditex continues to maintain its strong financial performance and operational efficiency, contributing to its position as a leader in the global fashion industry.
Mr. Marcos López García is a notable figure associated with Industria de Diseño Textil SA, commonly known as Inditex, one of the world's largest fashion retailers. Inditex is renowned for its brands, including Zara, Massimo Dutti, Pull&Bear, and Bershka. Marcos López García has held significant positions within the company, which has contributed to the operational and strategic successes of the group. His expertise in management and strategy has been instrumental in navigating the complexities of the retail fashion industry, particularly with the fast-paced, trend-driven approach that Inditex is known for. While specific details about his early career and personal background may not be extensively publicized, his influence within Inditex is marked by a focus on supply chain efficiency, sustainability initiatives, and digital transformation, areas that are crucial to maintaining the company's competitive edge in the global market. Inditex's business model, which emphasizes rapid production cycles and quick turnaround from design to retail, has been a significant area of focus in his work. Overall, Marcos López García's contributions have been vital in steering Inditex towards sustained growth and innovation in the fashion retail sector.
Lorena Alba Castro is an executive known for her role at Industria de Diseño Textil SA, commonly known as Inditex, which is the parent company of several major fashion brands, including Zara, Massimo Dutti, Pull&Bear, and Bershka. Within Inditex, she holds a significant position that involves overseeing logistics, a crucial aspect of the company's operations given its global reach and retail presence. Alba Castro's work in logistics has played a vital role in maintaining Inditex's reputation for efficiency and in-time supply chain management, which is essential for fast fashion where trends are constantly changing. Her leadership in this area supports the company in keeping its inventory fresh, adapting quickly to fashion trends, and managing the complex logistics of distributing products worldwide. She is recognized for her expertise in optimizing supply chain processes, implementing innovative logistical strategies, and leveraging technology to improve operational efficiency. Her contributions help Inditex maintain a competitive edge in the fast-paced fashion industry, ensuring products are available to customers in a timely manner without overstocking or product delays. Her role is pivotal in sustaining the dynamic and responsive logistics systems that Inditex is known for.
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[Foreign Language] Good morning to everybody. A warm welcome to all of those attending the presentation of Inditex's results for the interim 3 months 2024. I am Marcos López, Capital Markets Director.
The presentation will be chaired by Inditex's CEO, Oscar Garcia Maceiras. Also with us is our CFO, Ignacio Fernández. The presentation will be followed by a Q&A session, starting with the questions received on the telephone and then those received through the webcast platform.
Before we start, we will take the disclaimer as read. Please, Oscar.
Good morning, and welcome to our results presentation. It's our pleasure to join you today.
In the first 3 months of 2024, Inditex has continued its very robust operating performance, driven very much by the creativity of our teams and the strong execution of our fully integrated business model. This performance relies on the 4 key strategic pillars you are all familiar with: our unique fashion proposition, an optimized customer experience, our focus on sustainability, and the talent and commitment of our people. These factors have propelled our competitive differentiation.
Our Spring/Summer collections have been very well received by our customers. We have had a very satisfactory sales growth of 7.1%. Sales in constant currency increased by 10.6%. The execution of the business model has also been very robust with a healthy gross margin and disciplined cost management.
On the bottom line, net income increased 10.8% to EUR 1.3 billion. This performance has continued going into the second quarter. Store and online sales in constant currency between the 1st of May and the 3rd of June grew 12%.
Our diversified presence in 214 markets with low market penetration allows us to enjoy significant global growth opportunities. We have complete confidence in our ability to grow this business, mainly because the unique model we operate continues to drive an ever-increasing level of differentiation.
I'm going to hand you over to Ignacio now to go into the headline numbers.
Thank you, Oscar.
As you can see in our release, Inditex executed strongly in the interim 3 months of 2024. Sales have progressed well at plus 7.1%. We have managed the supply chain actively, and this has driven a very healthy gross margin. Operating expenses have, of course, been well managed, resulting in operating leverage. As a result, EBITDA grew 8% to EUR 2.4 billion.
In any case, we have also seen very strong progress in the net income line with an increase of 10.8% to EUR 1.3 billion versus EUR 1.2 billion in the first quarter 2023. Let me reiterate that sales have progressed very nicely at plus 7.1%, reaching EUR 8.2 billion. That's 10.6% in constant currency. Based on current exchange rates, we expect a minus 2% currency impact on sales for the full year 2024.
In the first quarter of 2024, gross profit increased 7.3% to reach EUR 4.9 billion and clearly illustrated a healthy execution of the business model. The gross margin reached 60.6%. Based on current information, we expect a stable gross margin of plus/minus 50 basis points this financial year.
There has been very tight control of operating expenses across all departments and business areas. Operating expenses increased below sales growth over the first quarter of 2024. Including all these charges, operating expenses grew 110 basis points below sales growth.
Over the first quarter of the year, we experienced a robust operating performance. Due to these factors, Inditex's inventory as of the 30th of April was 3% lower. As a side note, the end of the period inventory is considered to be of high quality.
And now over to you, Marcos.
Thank you.
On the back of the comments made by Ignacio, I would like to reiterate that the performance over the first quarter of 2024 has been remarkable. We are very content with execution over the period. We have continued with expansion and have opened stores in 28 different markets and have progressed with optimization activities. The store and online sales continued to be robust. The performance has been very strong at all levels. Our key priority remains to continue increasing our differentiation. In the strategy section, we will cover an extensive number of initiatives carried out in the period.
Back to you, Oscar.
Thank you, Marcos.
We keep on strengthening the strategic pillars of our fully integrated business model. Firstly, our priority remains to continually increase the appeal of our fashion proposition. Creativity, innovation, design and quality are the defining features of our collections and our key focus across all our teams. Our meticulous design process impacts every tiny detail of our garments and collections while striving to provide quality fashion to customers around the world.
The focus on an evermore enhanced customer experience comes as a result of the continuous process of upgrading stores with strong architectural features and with highly curated internal spaces. Thanks to our unique integrated store and online model, our teams have been able to take advantage of the remarkable growth opportunities we see across all channels, concepts and markets.
Underpinning this growth are new openings, enlargements and refurbishments of stores in the best locations, expanding our concepts to new cities and new territories and the launch of new services that enhance the customer shopping experience. The full implementation of the new security technology at Zara by the end of 2024 is going to plan.
We operate in 214 markets with low share in what continues to be a highly fragmented sector, and we see strong growth opportunities. To meet the current strong demand, which builds on the significant growth of the business in 2022 and 2023, we are undertaking a number of initiatives. We are planning investments that will scale our capabilities, obtain efficiencies and increase our competitive differentiation to the next level.
The growth of annual gross space in the period 2024 to 2026 is expected to be around 5%. Over this same time period, Inditex expects a space contribution to sales to be positive in conjunction with a strong evolution of online sales. For 2024, we estimate ordinary capital expenditure of approximately EUR 1.8 billion. This investment will be principally directed at optimization of commercial space, [ technological ] integration and the improvement of our online platforms.
As you already know, and in view of strong future growth opportunities, Inditex has designed a logistic expansion plan for 2024 and 2025. This 2-year extraordinary investment program, focused on the expansion of the business, allocates EUR 900 million per year to increase logistic capacities in each of the 2024 and 2025 financial years.
As already announced for the financial year 2023, the Board of Directors will propose at the Annual General Meeting a dividend increase of 28% to EUR 1.54 per share. The dividend will be made up of 2 equal payments. On the 2nd of May 2024, Inditex made a payment of EUR 0.77 per share. The remainder EUR 0.77 per share will be payable on the 4th of November 2024.
I would like to finish with a comment on our current performance. Spring/Summer collections continue to be very well received by our customers. Store and online sales in constant currency increased 12% between the 1st of May and the 3rd of June 2024 versus the same period in 2023.
Thank you all for attending this results presentation. That concludes our presentation for today. We will be happy to answer any questions you may have.
[Operator Instructions] The first question goes to Richard Chamberlain from RBC.
I wondered if I could ask a question on the net space contribution to Q1 sales, maybe you can comment on that. Is that -- if you can give us the number and is that in line with your expectations? And how is that sort of panning out in terms of sort of store openings versus further store absorptions?
Thank you for your question, Richard. Very much so, we -- our target for the next 3 years is to grow space by 5% gross. And obviously, optimization activities, as we have described in the presentation, are ongoing: enlargements, refurbishments and relocations. So this -- it remains a key feature. So you should assume that, yes, that the net contribution is very similar to our long-term target. We have mentioned that for the next 3 years, we expect positive space contribution. And we are very much -- we're very satisfied with the way we are executing on this.
The next question goes to Geoff Lowery from Redburn.
Could you talk a little bit more about inventory, please? I appreciate the balance sheet position is just a snapshot in time and doesn't indicate commitment, but you've done an amazing job of managing inventory growth below sales growth. And I wondered if that journey was done now or whether your logistics investments and the operation of the model could yield even bigger benefits.
Thank you very much, Geoff. As you have mentioned, inventory at the end of the period is 3% lower than in the same period last year. In the presentation, we have mentioned that we've had a very strong execution over last year. There was a normalization in the supply chain conditions. And despite this year, there have been some issues, as you know, with the Red Sea, we continue managing the inventory on the supply chain in a very, very efficient way.
Execution has been very, very strong. This is reflected not only in the inventories, also in the gross margin, in the sales performance of the first quarter on the trading update. So I would say that execution is one of the key focus of our business. And clearly, we have a very strong advantage there, it's our business model, right, and the fact that proximity sourcing is a key element. And this is what I would like to add on this.
The next question goes to Sreedhar Mahamkali from UBS.
Really just wanted to check if you were able to call out anything either in Q1 or current trading in terms of regional color, U.S., Europe, online stores? Anything you can help will be super helpful.
Not really. As you have seen, execution has been very, very strong, 10.6% sales growth over the first quarter. Our trading update remains very strong at 12%. Obviously, we have more demand in comp for the rest of the period, but we continue executing according to what we say. And in quarters, we prefer not to make any regional comments, but I would say a very strong execution across the board.
The next question comes from James Grzinic from Jefferies.
Just a quick one. Would you be able to add more color on how live streaming is helping in China? And I've been reading about plans for you to extend live streaming into Western markets. Any more color you could give on that front would be very helpful.
Thanks for the question. Well, we are very happy with the performance of live streaming in China. We started that service before the year-end. And we are working to expand that service through our own platforms to different markets, including the U.S. and the U.K., and the expectation is to start with this new service in the coming weeks.
The next question comes from Warwick Okines from Exane.
So I was just wondering whether or not you could comment on whether online is outperforming stores at the moment, if that mix is changing during the quarter and whether you expect that to happen during the year.
Thank you for the question. Well, we -- the performance of the company is -- the company is performing very well in both channels. Bear in mind that we have a fully integrated business model. It's not possible to understand the strength of the evolution of our physical store sales without taking in consideration the potential in terms of prescription coming from the online platforms. And at the same time, it's not possible to explain the strength of our online sales without taking into consideration the operational support coming from the physical store. Both channels are performing very well in a very positive trend, and we are very happy with the execution of the fully integrated model. Thank you.
The next question comes from Nicolas Champ from Barclays.
There is currently high inflation in some countries such as Argentina and Turkey. Would it be possible to provide the sales growth at constant currency, stripping out this market where inflation is particularly high? And a follow-up question also regarding the high inflation, cost inflation in Turkey. How has it impacted your sourcing strategy? I mean did you change, did you reduce your sourcing in Turkey because of the significant inflation and increase in operating costs, for instance, in this country?
Well, what I can say is that we have continued to execute according to our business model, and we have not made any short-term changes to the model based on the inflation we have seen. Our growth is mainly volume-driven, as you know. And clearly, we keep on executing according to our expectations. So I don't think I should highlight any market or any part of the operations that are massively impacted by that factor.
The next question comes from Georgina Johanan from JPMorgan.
Just a follow-up on the previous one, actually, where you talk about growth -- hello? can you hear me?
Yes, we can. Yes. Can you repeat, please? Can you repeat your question?
Sorry. Sorry about that. Yes, sure. Just a follow-up to the previous question. Where you talk about growth being mainly volume-driven, has there been any change at all in the pricing or ASP contribution into the new year versus last year, please, i.e., is any of that sort of acceleration that we're seeing in current trading driven by higher prices in any markets, please?
It's very, very stable. Nothing significant there, Georgina. No, nothing significant.
That concludes the questions. We'll move on to webcast now. We've had a couple of questions. The first of which is, can you update us on the EUR 1.8 billion logistics investment plan, please?
Thanks for the question. Well, to put some context and just to remind, we have had a very strong growth these last 2 years, as we referred during the presentation. And we keep on seeing growth opportunities going forward. And for our business model, it's key to keep on enhancing the experience of our customers. That relates, of course, to having the best stores and the best online platforms. But at the same time, the best customer experience also requires to have the capabilities needed to provide them what they are looking for, where, when and how they want.
We are executing within this context, our logistics expansion plan for '24 and '25, this EUR 900 million each of these 2 years. And the different projects of the plan are on track. And as announced in March, most of them will be gradually operational by the end of 2025.
The next question on the webcast platform relates to Spain. Can you provide any comment on your growth in Spain, your largest market, please?
Well, we are very happy with our performance in Spain. As a remainder, in 2023, sales in Spain grew 13%, the fastest-growing region for the group alongside Europe ex Spain, remain being active with our store optimization program. One example of this has been Seville where, in 2023, we closed a few smaller stores at the city center to open a larger store at Plaza del Duque. Our newest store not only allows us to better showcase Zara full collection, but also has improved customer experience with sales accounts, automated online pickup and return points, et cetera, et cetera. We continue to find opportunities for our profitable growth in Spain with all our concepts.
That concludes the webcast questions for today. Thank you.
Thank you to all of those participating in the presentation today. For any additional questions you may have, please get in touch with our Capital Markets Department, and we will welcome you back in September for the first half 2024 results.