Good news for Inditex, the owner of fast fashion giant Zara, as sales of its spring-summer collection have risen by 16% in the past month. Despite the loss of its Russian business and higher wage costs, the company has reported a 54% rise in first-quarter profit, exceeding analysts’ expectations with a net profit of €1.2 billion. This success suggests that Inditex has managed to overcome the challenges of keeping prices competitive, even with increased cost pressures.
In contrast, rival H&M has struggled to compete in the current cost of living crisis, with sales impacted by both bad weather in its home market and economic pressures. Inditex, on the other hand, has seen in-store and online sales rise 13% to €7.6 billion in the first quarter, with a record gross margin of 60.5%, indicating that they have been able to pass on higher prices to shoppers.
Inditex’s strategy includes maintaining higher prices outside the Eurozone, with some of its clothes being up to 91% more expensive in countries such as the United States, Mexico, or Saudi Arabia. Lower demand in the US has been offset by less weather-affected sales in southern Europe, and the company plans to open 30 more stores in the US in the next two years.
To enhance the customer experience, Inditex has invested in new self-scanning checkouts and replaced hard anti-theft tags with chips sewn into garments to avoid long queues. Analysts predict that only the strongest global fashion retailers will gain market share in an environment where consumers are becoming more discerning. Inditex’s success in maintaining sales and profit growth amidst economic pressures is a good indicator for the future of fast fashion retail.
