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A CORUÑA, Spain (Reuters) -Zara owner Inditex (BME:ITX) said sales of its spring-summer 2023 collection jump over the past six weeks, but its shares fell on Wednesday as the Spanish retailer flagged higher investment spending.
Inditex’s profits jumped by 27% in 2022 as sales exceeded pre-pandemic levels in the first full year since Marta Ortega, daughter of founder Amancio Ortega, took over as company chair.
In-store and online sales for the world’s biggest fashion retailer rose 18% to 32.6 billion euros ($34.99 billion) from 2021 and were 15% higher than in 2019, before the pandemic hit.
The pace of sales continued in the first six weeks of Inditex’s current fiscal year to Jan. 31, 2024.
Between Feb. 1 and March 13, Inditex said sales jumped by 13.5% from the same period a year earlier. Excluding Russia, where Inditex stores have been closed since the Ukraine conflict started just over a year ago, sales in that period increased by 17.5% in constant currency terms.
But Inditex surprised investors with a hike in capital expenditure to 1.6 billion euros from 1.1 billion euros in the previous year, a higher level than expected by the market.
“It is the right thing to keep on investing for this future growth,” Chief Executive Oscar Maceiras told analysts on a call.
One area of investment is technology: Inditex said it would start phasing out hard tags in stores this year, thanks to a new security technology. The retailer has pushed to increase the productivity of its stores: sales in stores grew by 23% in 2022 even though there were 10% fewer of them than the previous year.
Inditex’s Zara brand led the group with a 38.5% jump in profit before tax from the previous year. Pre-tax profit fell at two of its other brands, Oysho and Massimo Dutti, by 12% and 10%, respectively.
Overall, demand for Inditex clothes continued even after a price rise of 5% or more early last year to mitigate rising costs, according to analysts at Deutsche Bank (ETR:DBKGn), UBS and Royal Bank of Canada.
That contrasts with rival H&M whose customer base is more price-sensitive. H&M on Wednesday reported a 12% increase in net sales for its December-February period, missing market expectations.
($1 = 0.9316 euros)
