(Bloomberg) -- Inditex SA reported first-half sales and earnings that topped estimates as the owner of the Zara clothing brand defied a global surge in inflation.
Earnings before interest and taxes rose to 2.43 billion euros ($2.43 billion) in the six months through July, the Arteixo, Spain-based company said Wednesday. That compares with the 2.36 billion-euro average estimate of analysts surveyed by Bloomberg.
The world’s biggest clothing retailer has kept customers shopping while increasing prices above inflation in many of its larger markets. Data compiled by UBS from thousands of websites across 20 regions show that the average price of a Zara clothing item was up 12.2% in July compared to last year. That compares with a 5.6% increase at rival Hennes & Mauritz AB.
“It is clear that Inditex is successfully feeding through input price inflation in a selective way and is not taking significant pain through the gross margin,” said Anne Critchlow, an analyst at Societe Generale.
The gross margin hit a seven-year high in the first half and the company predicts it will be roughly stable on a full-year basis.
The textile giant has a different cost and supply chain structure from competitors, with about half its products sourced from what it calls proximity markets -- notably Spain, Morocco, Portugal and Turkey. It has also seen an increase in dollar-denominated revenue with the growth of sales in the U.S., which became its second-largest market last year. The dollar this month strengthened to an almost two-decade high against the euro.
Zara’s US Clothing Sales Help Swell Top Line After Dollar Surge
First-half sales reached 14.8 billion euros, up 25% from a year before and ahead of analysts’ estimates. In the first six weeks of the third quarter, sales climbed 11% relative to the same period a year earlier.
The retailer said currency swings will increase sales by 0.5% this fiscal year and reaffirmed that online purchases will account for more than 30% of total sales by 2024.
Inditex shares are down about 21% this year amid a wider sell-off in the industry on global concerns over inflation and the risk of an economic contraction in some countries. The Stoxx 600 Retail Index is down about 35% in 2022.
Marta Ortega, the daughter of Inditex’s founder and controlling shareholder, replaced Pablo Isla as executive chairman in April. Isla had already handed over the chief executive officer position to Oscar Garcia Maceiras in November.
Marta Ortega, the daughter of Inditex’s founder and controlling shareholder, replaced Pablo Isla as executive chairman in April. Isla had already handed over the chief executive officer position to Oscar Garcia Maceiras in November.