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Zara Owner Inditex Reports Q1 2020 Loss of 409M Euro despite Jump in Online Sales in April

Spanish multinational clothing company Inditex SA (BME: ITX) has released its first-quarter financial results. Saying that the COVID-19 crisis “materially impacted” its activity, Inditex reported a net loss of 409 million euros ($465 million) for Q1, which is the first time it has such figures.

The loss for the period from February through April included a provision of 308 million euros for the Inditex store optimization program which will continue until 2021. Notably, the Q1 loss is a kind of off-the-wall, as Inditex experienced huge growth in online sales for the period.

Yesterday, Inditex stock closed at 25.75 euros per share. Currently, it is 1.87% up, at 26.16 euros. However, the company’s shares are down about 18% since the beginning of the year.

Inditex Online Sales Soared in Q1

On the background of the pandemic, Zara owner saw a 50% increase in online sales in Q1 2020. The peak was reached in April when Inditex online sales jumped by 95%. That month, Inditex had only 965 stores open in 27 countries, out of a total of 7,469 stores as of late 2019. Therefore, Q1 3.3 billion euro sales still fall short of nearly 6 billion euros in Q1 2019.

Richard Chamberlain, managing director of European general retail at RBC Capital Markets, said:

“Pre-COVID 19, online generated about 14% to 15% of Inditex’s sales, and no doubt that will have accelerated now. The advantage they have is a central pool of inventory, which is shipping out stock to shops a couple of times a week so the idea of shipping directly to people all over the world is pretty easy.”

In May, Inditex sales further increased as the economy started recovery. But the company said they are “not yet at normal levels”. In contrast to the same time last year, its both store and online sales in local currencies dropped 51%.

Inditex Expansion Plans

Despite the Q1 loss and just starting to step down pandemic, Inditex is making plans for expansion. The company is going to invest 2.7 billion euros ($3 billion) to enhance e-commerce operations of its chains like Zara and Bershka. In addition, Inditex wants to expand its store space to gain a competitive edge.

The major part of Inditex stores is still closed. But the company remains in good shape, thanks to its strong balance sheet.

RBC Capital analyst Richard Chamberlain said:

“Inditex has a relatively fortress balance sheet. Having a very strong balance sheet gives them a lot of capacity to weather the storm and to keep investing for the long term and look after their people and suppliers very well.”

By the end of this month, Inditex’s key markets will resume business.

Zara Owner Inditex Reports Q1 2020 Loss of 409M Euro despite Jump in Online Sales in April