Zara-owner Inditex's sales jumped 11% at constant currencies in the first half of its spring season, boosted by upmarket fashions and continuing the strong momentum that saw its 2023 sales growth top that of arch rival H&M.
Shares in the world's biggest fashion retailer rose 3.4% to a record high in early trade after it reported the figures for February 1 to March 11.
The Spanish group has widened its lead over Sweden's H&M thanks to its ability to deliver trends faster from nearby suppliers and sell more clothes at higher prices. That has also helped it counter fast-growing Chinese rival Shein.
In January, H&M reported a 4% drop in December and January sales, a bad sign for the key Christmas shopping period. German online fashion retailer Zalando today reported a full-year decline in sales.
Inditex's sales rose 10% to a record €36 billion in the year to January 2024.
The company's results were in line with analyst expectations but its sales are growing more slowly than a year earlier, as the pace of price increases has moderated. In the first half of spring 2023, its sales rose 13.5%.
Inditex posted an annual net profit of €5.4 billion, up 30% on the year and in line with analyst expectations in an LSEG poll, as the company maintained a gross margin of 57.8%.
Inditex said it planned to invest €900m a year up to 2025 on logistics. It will spend a total of €1.8 billion this year to expand its store space by 5%, and on technology and improving online platforms.
The company had 5,692 stores worldwide in 2023, 123 fewer than a year earlier, and said its inventories in January were 7% lower year-on-year, in part due to the "normalisation in supply chain conditions".
It said it would increase its dividend payout by 28% to €1.54 per share, above analyst expectations.
Inditex's core brand Zara began to raise prices earlier than H&M in response to surging inflation and as part of a shift to offer special, high-fashion pieces, while growing other brands in its budget range.
But over the last two years, Zara has increased average prices season-over-season at a slower pace than H&M and others, according to retail intelligence company EDITED.
Investors expect Inditex to continue to outperform H&M. The Spanish group's share price trades at 21.8 times expected earnings for the next 12 months, while H&M's ratio is 16.1.
"Inditex achieved the most difficult thing, which was being able to grow while passing on inflation in 2023. It did it because it has a better value proposition than competitors like H&M," said José Ramon Iturriaga, fund manager at Abante Advisors, which holds Inditex shares.
"I don't think this year will be more any more difficult for Inditex," he added.
