Source: Company reports/Coresight Research

FY17 Results

Spanish apparel retailer Inditex reported revenue growth of 8.7%, to €25,336 million, in the fiscal year ended January 31, 2018. Revenue was slightly below the consensus estimate of €25,406 million.The company grew revenues by 10% at constant currency. The company’s gross margin contracted by 70 basis points in the year, to 56.3%. Operating expenses grew by 9% during the year, prompting the SG&A margin to expand by 20 basis points.The operating margin contracted by 20 basis points, to 17.0%. Comparable sales grew by 5%year over year, against a strong comparative of 10% growth in FY16. During the year, Inditex expanded total selling space by 7%, opening 183 net new stores in 58 markets and reaching a total of 7,475 stores in 94 markets. The majority of the openings were under the Zara, Zara Home and Oysho banners. The company launched online sales for Zara in India, Malaysia, Singapore, Thailand and Vietnam during the year and for Bershka in the US and South Korea.

Sales by Banner

• Zara grew sales by 8%,to €16,620 million,and accounted for some 66% of Inditex’s total sales.
• Bershka grew sales by 11%,to €2,227 million.
• Massimo Dutti grew sales by 8%, to €1,765 million.
• Pull&Bear grew sales by 12%, to €1,747 million.
• Stradivarius grew sales by 10%, to €1,480 million.
• ZaraHome grew sales by 7%, to €830 million.
• Oysho grew sales by 12%, to €570 million.
• Uterqüe grew sales by 17%, to €97 million.

Online Sales

Inditex broke out online sales for the first time in its annual results this year. In FY17, online sales grew by 41% and accounted for 10% of the company’s total net sales. Online sales accounted for 12% of net sales in markets with e-commerce sites.By way of comparison, H&M reported in December that e-commerce accounted for 13% of its total sales in its most recent fiscal year.

Outlook

Inditex’s net sales grew by 9% year over year between February 1 and March 11, 2018. The company remarked that sales volume during the Easter trading period will influence sales during the spring and summer. In FY18, Inditex expects to grow its store space by 6%, net of closures. The company expects to incur capital expenditures of €1.5 billion, driven mainly by 350–400 gross store openings and the selective absorption of about 200 stores. Consensus estimates call for FY18 revenue growth of 9.0%, an operating income decline of 0.4% and an adjusted EPS increase of 7.2%.