Zara owner shows rival H&M a clean pair of heels as sales rebound

The owner of fashion chain Zara revealed record trading as sales and profits surged above levels seen before the pandemic struck.

Inditex – the world’s biggest clothing retailer – notched up a sales haul of 6.99 billion euros (£6 billion) in the three months to July 31, up 7% on the previous high seen in the same quarter two years ago, before Covid.

It saw net profit reach 850 million euros (£726 million), again smashing records seen in 2019 as disruption from closed stores eased in the second quarter and thanks to rising consumer confidence and soaring online sales.

But fast-fashion rival H&M reported on a tougher past few months for the chain, with sales still recovering as it said the pandemic continued to affect stores and trading in its third quarter.

The group reported sales up 9% on a year earlier, or 14% with currency movements stripped out, at 55.6 billion Swedish krona (£4.7 billion) in the three months to August 31, but this remains 11% lower than 2019 levels.

Around 100 H&M stores remained closed at the end of the quarter, down from 180 at the start of June.

H&M said: “Lockdowns and restrictions have continued to hamper development, particularly in Asia.

“However, as restrictions have been eased, sales in store have picked up in many markets while online sales have continued to increase.”

The contrasting performance at Inditex came as the rival group saw pandemic disruption ease considerably, with a reduction in trading hours narrowing to 6% in the second quarter.

It swung to an overall first-half net profit of 1.27 billion euros (£1.08 billion), compared with a loss of 195 million euros (£167 million) a year ago.

The group’s bounceback has been helped by efforts to ramp up online sales in the face of the pandemic, with internet revenues jumping 36% higher year on year in the first half – more than double the levels seen in 2019.

It expects online sales to account for more than a quarter of total revenues this financial year.

Inditex added that trading had started well in the second half so far, with sales across stores and online up 22% between August 1 and September 9, which is 9% higher on a two-year basis.

The group continued to open stores despite the pandemic impact, adding 92 outlets in 27 markets, boosting its number of shops worldwide to 6,654.

New openings included stores in Edinburgh and Cardiff during the second quarter.

Harry Barnick, a senior analyst at Third Bridge, said Inditex is becoming an “early winner in the post-Covid retail world”.

“Inditex group has an advanced and competitive online channel compared to peers such as H&M,” he said.

“The company has already exceeded its 2022 targets and could reach 35% to 40% of sales in the next five years.”