Zara owner Inditex has reported a rise in profits on the back of strong sales of its spring-summer product lines, including a Barbie capsule collection.
The highly-anticipated launch inspired by the recently released Warner Bros film featured a $89.90 pink gingham dress, a $149 Barbie logo bag, and a dupe of Margot Robbie’s cowgirl outfit from the film.
Many of the items sold out in hours and the flurry of customers helped Inditex stock rise by 35% this year.
The world’s biggest fast fashion company, which also owns Pull & Bear, Bershka and Massimo Dutti, posted a net profit of $2.7 billion (€2.5 billion) for the six months to July 31, outpacing a $2.5 billion euro market forecast according to data from London Stock Exchange Group.
Inditex told shareholders on Wednesday that sales grew by 13.5% over the half year to $18 billion (€16.9 billion euros), with growth both in stores and online. This included a 13.1% increase in sales at Zara to $13.3 billion (€12.4 billion).
Inditex shares were down 3.2%, to €34.65, in afternoon trading Wednesday, as investors questioned whether its slowing sales growth suggested a tougher road ahead.
How its CEO is driving growth
The surge Inditex shares have experienced this year erases the stock price dip experienced after Oscar Garcia Maceiras was unexpectedly named chief executive in late 2021. The company is now experiencing share prices not seen since the summer of 2017.
Inditex was among the first fashion retailers to raise prices in response to surging inflation early last year. Its higher and more diverse pricing strategy outside its home market of Spain helped it post record margins.
Maceiras has stepped up efforts to grow the retailer’s flagship brand Zara in the United States—which two years ago became Inditex’s biggest market after Spain—with plans to open 10 new stores in the country and refurbish or enlarge another 13.
Overall, however, Inditex has managed to increase sales while reducing its physical footprint. The fast fashion giant reduced its store count globally from 5,801 to 5,745 in the second quarter of this year to focus on bigger locations that are more efficient.
These efforts have included cracking down on shoplifting in its stores by replacing tags with chips sewn into garments in the autumn and winter collections, the company told Reuters.
The retailer is also trying to entice more aspirational shoppers with deeper pockets. For example, last week it launched a collection with celebrated fashion photographer Steven Meisel, with a campaign featuring supermodels including Linda Evangelista, Irina Shayk, Gigi Hadid, and Kaia Gerber.
Looking ahead, the company said it “continues to see strong growth opportunities” as it currently has low market share in the 213 countries where it has a presence.
The economic backdrop
Thousands of smaller retailers and mom-and-pop stores have struggled to keep up with high inflation, with at least 24 brands filing for bankruptcy or under restructuring since June last year, according to Bank of America analyst Geoffroy de Mendez.
Faced with rising energy bills and interest rates, paired with dampened consumer confidence Bed Bath & Beyond, M&Co, Secoo, and Joules all entered administration in the past year.
However, overall European fashion brands have reported mostly positive results for the second quarter. Inditex rivals H&M and Mango similarly posted better-than-expected results this year.
