What's going on?
Inditex – the world’s biggest fashion group and owner of Zara and Massimo Dutti – had a day of respite on Wednesday after what’s been a tough summer.
What does this mean?
The Spanish company (controlled by Europe’s richest man, Amancio Ortega) said profits in the first half of the year grew by 3%. The results suited investors well: the shares went up a size, rising 4%, as the company was able to shrug off the challenge of a strong euro (its sales abroad translate into fewer euros when it brings the money home to Spain). Inditex’s fast fashion strategy – where it focuses on getting new designs into its 7,400 stores ASAP – means it makes most of its clothes in and around the eurozone, while it makes most of its sales outside the region. (Even in 2018, shipping clothes from China can take months.)
Why should I care?
For you personally: Prepare to buy more clothes online, from more stores.
Inditex is fighting on two fronts. Its traditional rivals – the likes of Kohl’s in the US and Next in Britain – are copycatting the Spanish company’s style by getting the latest designs to shoppers faster. Meanwhile, online-only retailers like ASOS and Amazon (and even second-hand marketplaces like Depop) are winning younger consumers used to making purchases on the interwebs. In response, Inditex is planning to make all its brands available online globally by 2020 – including in countries where it doesn’t have any physical stores.
The bigger picture: Retail is hard.
European retailers have had a rough summer, with the heatwave meaning shoppers bought items that don’t generate as much profit, like t-shirts (tweet this). And, while Inditex’s online-offline war is good news for fashionistas (it keeps prices down), it’s a challenge for the company – where margins have declined for five straight years. Inditex’s stock is pricier than others in the fashion sector, leaving it less room for slip-ups as expectations are likely higher.