14th Sep 2022 17:59
(Alliance News) - There was little in the way of evidence that investors of London-listed retailers took heart from positive results from Zara owner Inditex SA.
Inditex added 3.8% after posting a sharp interim sales hike. Its fortunes helped lift Stockholm-listed peer H & M Hennes & Mauritz AB which added 0.5%.
London-listed retailers struggled to enjoy a similar read-across, however. Shares in Zara's high street neighbours Next PLC and Marks & Spencer Group both fell 1.1% on Wednesday. JD Sports Fashion PLC lost 0.9% and Associated British Foods PLC,the owner of Primark fell 2.5%.
In the six months to July 31, Inditex's net profit rose to EUR1.80 billion from EUR1.27 billion. Operating income increased to EUR2.43 billion from EUR1.69 billion.
Net sales improved 25% to EUR14.85 billion from EUR11.94 billion. Zara sales were up 29% to EUR10.93 billion from EUR8.49 billion.
interactive investor analyst Victoria Scholar commented: "This is an impressive half-year scorecard from the world's biggest clothing retailer with revenue and earnings both topping analysts' forecasts as Inditex manages to successfully navigate the challenges of inflation. It has successfully passed through some of its cost increases to customers via higher prices at Zara in particular, without having a negative impact on demand. On top of that Inditex is nimbly preparing for any potential supply chain issues by stocking up early on inventory for the season ahead."
There are roughly 70 Zara stores in the UK.
Analysts at Swiss bank UBS said hopes were high heading into Inditex's results.
"We expect a positive reaction with relief after a spate of recent disappointments in the sector. While investors were positive on ITX into the results, 1H delivered on those expectations. The reiteration of flat gross margin and stronger current trading for autumn/winter collections are likely to reassure investors," UBS added.
UBS has a 'buy' rating on Inditex shares.
What was also promising for Inditex, was that measures to charge customers for online returns did little to dissuade customers from buying goods.
ii's Scholar added: "In May, Inditex announced plans to charge customers for online returns in 30 countries. Zara’s parent company today said it saw no significant impact from this policy change. To combat concerns about supply chain issues, Inditex has temporarily accelerated its autumn/winter inventory to offset any potential problems."
High return levels have been somewhat of a gripe for London-listed retailers recently.
Online-only retailers boohoo Group PLC and Asos PLC have been hit by soaring clothing returns recently.
UK retailers have also had to contend with rampant inflation. Figures on Wednesday offered some respite on that front, however.
The UK consumer price index rose 9.9% year-on-year in August, unexpectedly slowing from 10.1% in July. Consensus, according to FXStreet, was for the rate reading to tick up to 10.2%.
July's figure had been the highest since current records began in 1997 and at a level, according to models, not seen since 1982. Inflation still remains far chunkier than the Bank of England's 2% target.
By Eric Cunha; [email protected]
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