June 23, 2024

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Inditex gains share and tops the textile industry in profits at the beginning of 2024

Inditex gains share and tops the textile industry in profits at the beginning of 2024

It grew 7.1%, two points more than the next comparable group, and outpaced Nike’s profits by more than $200 million. He now earns €16 for every €100 he invoices.

Inditex It expands its superiority over its competitors and shows its strength with the beginning of 2024, which is characterized by Broad-based slowdown in the textile sector due to geopolitical uncertainty, pent-up customer demand and adverse weather in Many major markets.

The Spanish group’s sales volume reached $8,150 million in the first quarter For the year – from February to April -, 7.1% more. This number represents the most contained development since the end of the epidemic, however Far superior to its competitors, except for luxuryWhich prompted it to gain a global share at the beginning of 2024, according to EXPANSIÓN analysis.

Express retail (+4.9%) and its main brand is Uniqlo and Hugo Boss (+4.7%) were the next fastest growing companies, and in both cases were more than 2 points below Zara’s owner, followed by Adidas company (+3.5%) and gap (+3.4%), increasing their sales by half of Inditex’s.

As for Nike, the only textile company with higher bills than the Spanish company, its income has stagnated (+0.3%), while H&M, Puma, PVH (Calvin Klein and Tommy Hilfiger) and VF Corp (Vans or The North Face) Not only did they not grow, but… They reduced their sales volume.

Despite three effects

The numbers are even more surprising if you take them into account Three factors affect the owner of Zara negatively In compatibility. The first is that Inditex comes from record turnoveragainst many of these competitors who have had a complicated 2023 and, In theory, they had an easier time growing up.

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The second has to do with calendar. The analysis takes into account the last quarter reported by each company, thus reflecting its development at the beginning of 2024. Inditex’s quarter runs from February to April, while H&M, Nike and Fast Retailing’s quarters cover December to February, meaning they benefit from higher Christmas sales.. Despite this, they have become fewer.

Finally, there is another issue that is no less important. Inditex achieved organic growth of 10.6% in the markets in which it operates The currency effect subtracted 3.5 points from the increase in sales. Excluding exchange rates, Hugo Boss grew by 6% and Gap by 3%. Nike has kept its sales stagnant. H&M and PVH reduced their revenues by 2% and 9%, respectively. These numbers show that Inditex was the company that saw its growth affected most by exchange rates this quarter, after only Adidas. -They limited their growth from 8% to 3.5%- And puma – It witnessed a slight increase of 0.5%, which turned into a decrease of 3.9% due to the impact of currencies.

Inditex’s business development is also enhanced by A strong start to the second quarter of the year -From May to July-, which is led by the company Oscar Garcia Maceras It witnessed a 12% increase in sales at constant exchange rates, indicating its accelerating growth.

This was the data Most valued by analysts In the results presentation last week and caused Its share on the stock market increased to 45.67 euros per share, with a capital of $142.3 billion.

A margin of luxury

Inditex’s greatest strength Not only does it grow, but it also does so by increasing its profitability. At the start of fiscal 2024, the textiles group achieved a net margin of 15.88%, five-tenths more than the previous year and three points higher than before the pandemic.

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Thus, the company now earns approximately 16 euros for every 100 euros it issues invoices, which is not achieved by any competitor, not even close, in its sector.. The next best net margin is Fast Retailing’s margin, which is 11.17%, five points lower, while Nike’s is 9.43% and PVH’s is 7.75%.

the Distance with GAP and H&Mwhich have traditionally been Inditex’s most direct competitors, It’s bigger. GAP’s margin was 4.98% at the start of the year, three times lower than owner Zara, while H&M’s margin was 2.23%. The Swedish company would have to pay a bill seven times larger than the Spanish company to earn the same amount.

The recipes for this profitability are well known: Short Stores With whom Inditex works, its own production and logistics chain, and its ability to sell almost all of its clothing at 100% of its price -Almost without making discounts-, your An integrated and synergistic model for physical warehouses and Connected, And his ability to do so Sell ​​more with fewer stores These are just some examples.

If the reasons are known, the limits are not many. The Spanish group already has a margin more similar to that of a luxury brand than a corporate margin the current. Inditex ended fiscal year 2023 with a net margin of 15%, almost equal to its profitability. keyring (15.7%) Owner Gucci, Balenciaga, Saint Laurent or Bottega Veneta. The difference is noticeable considering the price difference between the two.

Leader with benefits

Its high profitability, coupled with strong sales, has made Inditex a leading company Leader in profits in the textile sector, excluding luxury products. The owner of Zara earned $1,294 million in the first quarter of 2024, compared to $1,076 million for Nike, despite having 28% fewer sales.

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The Spanish group actually outperformed its North American rival in the first quarter of 2023, although it was almost on par (1,168 versus 1,138 million). If the focus is expanded, Before the pandemic, in the first quarter of 2019, Nike earned nearly $300 million more than Inditex, while it is now less than $200 million.

The distance with the rest of the companies is greater. The Spanish giant received 2.5 times more than Express Retail (Uniqlo) At the beginning of 2024, its profits exceeded gap And 12.2 times H&M.

The shapes look even more interesting when seen together. Fast Retailing, H&M, GAP, PVH, Hugo Boss, Adidas and Puma combined made profits of 1,217 million at the start of 2024, 77 million less than Inditex.