Inditex Sees Spring Surge in Sales Despite Fierce Competition

Inditex, the owner of Zara, reported a strong rise in sales from its Spring/Summer collections, boosting shares. Second-quarter sales are also showing potential, despite a dip in the first quarter compared to last year. The company continues to invest in technology to outpace competitors like H&M and Shein.

Zara owner Inditex reported a pick-up in recent sales from its Spring/Summer collections, boosting its shares on Wednesday as the world's top fashion retailer delivered quarterly results in line with expectations.

The Spanish company said sales rose 12% between May 1 and June 3 from the same time the year before, helping to lift its shares almost 5% in early trading. It also reported a 7% rise in sales for its first quarter to the end of April, an expected slowdown from a year earlier when the company benefited from a post-pandemic shopping spree.

Inditex, whose brands also include Pull&Bear and Massimo Dutti, is battling intense competition from rivals such as H&M , Shein and Temu by chasing and delivering fashion trends faster by investing in logistics and technology. The company has outperformed competitors in recent quarters benefiting from investments in new store and online experiences such as livestream shopping.

It reported 8.15 billion euros ($8.87 billion) in sales for the three months to the end of April, compared with analysts' average forecast of 8.1 billion euros in an LSEG poll. Sales between May 1 and June 3 "suggest some pent-up demand after a cool and rainy start to spring in southern Europe," said RBC analyst Richard Chamberlain. He estimated a 20% increase in sales for the rest of the second quarter.

Xavier Brun, portfolio manager at Madrid-based Trea Asset Management, which holds Inditex shares, said Inditex was currently "competing against itself", with a strong performance last year making for a tough comparison this year. Brun expects sales to rise between 6% and 7% this year, below 2023's 10% growth.

Inditex said it expected adverse currency moves to cut 2% from sales this year, up from previous guidance for a 1.5% hit. First-quarter net profit rose 11% to 1.29 billion euros ($1.40 billion), in line with analysts' average forecast. In the first quarter of last year, net profit jumped 54%.

Analysts had expected a slowdown in sales growth in early spring, partly due to weakness in southern Europe and strong competition in top markets like the United States from Shein. Inditex said it planned to invest 900 million euros per year through 2025 on expanding logistics capacity, mainly in Europe.

($1 = 0.9192 euros)

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