Fashion retailer Industria de Diseño Textil SA, owner of the chain Zara, on March 14 reported that its online sales grew 41% in the fiscal year ended Jan. 31, which accounted for 10% of group sales. This was the first time the company provided a breakdown of its e-commerce sales.
Based on fiscal-year group sales of €25.34 billion, online sales at Inditex, as the company is known, totaled about €2.53 billion.
In markets where the company operated both brick-and-mortar stores and e-commerce platforms, online transactions accounted for 12% of their net sales.
In a March 14 conference call with analysts, Inditex Chairman and CEO Pablo Isla said 98% to 99% of the growth in online sales in the year to Jan. 31 was organic, and that the company's websites recorded more than 10 million customer visits every day.
Isla declined to identify Inditex's best-performing markets for e-commerce, but added: "We continue to see very significant online sales growth in coming years."
Inditex in fiscal 2017 invested €1.8 billion in further developing its radio-frequency identification technology to improve flexibility and response times by integrating stores and online inventories. The system is fully up and running at Zara and will be deployed this year at Massimo Dutti, Pull&Bear and Uterqüe, and go groupwide by 2020.
As a result, Inditex is able to fulfill e-commerce orders using inventory from its physical stores when garments are unavailable in its online stock. This, in turn, allows Inditex to offer a next-day delivery service — same-day in metropolitan areas — as well as click and collect.
Inditex's online sales performance contrasts with that of fashion retail rival H&M Hennes & Mauritz AB, which on Feb. 14 disclosed that online sales accounted for 12.5% of group sales in its fiscal year ended Nov. 30, 2017.
Analysts at J.P. Morgan Cazenove said in a March 14 research note that Inditex's online sales were "lower than we, and the market, had suspected them to be."
Inditex reported that net income attributable to the controlling company in the three months ended Jan. 31 increased 7.5% year over year to €1.03 billion from €955 billion in the year-ago period, surpassing the S&P Capital IQ consensus estimate of €1.02 billion.
Sales in the period increased 6.8% year over year to €7.37 billion from €6.91 billion.
Gross margin slipped to 53.5% from 54.8%, largely due to unfavorable foreign-exchange rates. The analysts at J.P. Morgan Cazenove, who forecast a decline of 120 basis points, also blamed discounting.
Fashion retailers' sales were impacted by unseasonably warm weather in October 2017, and the unpredictable climate may have dampened performance at the start of the current fiscal year. Inditex reported that sales in local currencies in the period from Feb. 1 to March 11 of this year had increased 9% from 2017, below the J.P. Morgan Cazenove estimate of 10.5%.
For the fiscal year ended Jan. 31, net income rose 6.6% year over year to €3.37 billion from €3.16 billion as sales swelled 9% to €25.34 billion from €23.31 billion. Earnings per share climbed to €1.08 from €1.01, in line with the S&P Capital IQ consensus estimate for normalized EPS of €1.08.
The company, which is based in Arteixo, Spain, said its board would propose a 10.3% year-over-year increase in the dividend to 75 cents per share.
In late-morning trading, Inditex's shares retraced early losses and were up a cent at €24.27.
