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Zara owner Inditex said it would spend nearly €2bn to build more logistics “muscle” as it announced accelerating sales growth that pushed its shares to a record high.
The Spanish fashion group, which has been outperforming its rival H&M, said it would spend nearly €1.8bn on distribution centres over the next two years to capitalise on opportunities to sell even more clothes and shoes.
It unveiled the plans as it reported a “strong start” to the current quarter, with sales up 11 per cent between February 1 and the start of this week and said its spring and summer collections had been “very well received by customers”.
Along with news that sales increased 8.6 per cent year-on-year to €10.4bn in the three months to the end of January — an acceleration from the previous quarter — the figures triggered a 5 per cent jump in its share price.
That rise extended a rally that began last October and has lifted the stock price by nearly 33 per cent, reaching €43.13 on Wednesday. Over the same period shares in fast fashion rival H&M, which previously reported a drop in December and January sales, are up less than 6 per cent.
James Grzinic, an analyst at Jefferies, said the results “confirm just how much stronger than the rest of its peer group” Inditex has become.
The company, whose brands include Massimo Dutti and Pull & Bear, has been gradually raising prices while shifting its emphasis to more stylish designs in its long-running battle with H&M.
Óscar García Maceiras, chief executive, hailed the importance of Inditex’s “rigorous” cost control in the past year. Expenses increased by less than sales and, in the final quarter, net income climbed by 23.5 per cent to €1.3bn, slightly ahead of analyst expectations.
The big investment plans, however, prompted questions from analysts about whether the company’s profitability was about to dip. In addition to the “extraordinary” €1.8bn spend on logistics, it said it would also invest €1.8bn in 2024 in opening 192 new stores, refurbishing or enlarging old ones, and upgrading its ecommerce operation.
Marcos López, Inditex’s capital markets director, said the company was conscious of the need to provide “attractive” returns to shareholders and emphasised that it was seeking “to invest ahead of the cycle”.
“The company has thought it should add muscle for future expansion, for future growth,” he told analysts on a call.
The logistics investment will create new distribution centres for Zara, the Bershka brand and footwear in Spain, as well as expanding an existing Zara hub in the Netherlands. The projects will be operational as early as the second half of 2025.
While Zara has roughly 5,700 stores in more than 90 countries, most of its outfits have to pass through distribution centres in Spain before they reach shops or are dispatched as online orders.
García Maceiras said the goal of the expansion was to ensure Inditex could “provide our customers what they are looking for when, where, and how they want” it.
Inditex announced a dividend of €1.54 per share for 2023, broadly in line with market expectations.
Additional reporting by Carmen Muela in Madrid
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