Inditex, owner of Zara, gets benefits, although amputated by the pandemic

The Spanish textile giant, Inditex, Zara's owner, recorded a net profit in 2020 in a free fall of 70%, to 1.1 billion euros (USD 1.32 billion), due to the closure of shops caused by the covid-19 pandemic.

Over the course of the year, on average more than 25% of the group's stores have been closed.

And in the first wave of the pandemic, the brand came to suffer closures in almost all of its establishments, Inditex President Pablo Isla explained at a press conference this Wednesday.

By the end of January, less than 20 per cent of their businesses operated normally. The rest were either completely closed in countries with strict confinement such as the United Kingdom, or operated with limited time or capacity.

Under these conditions, Isla highlighted the fact that it achieved a net profit of 1.1 billion euros (USD 1.32 billion), especially after starting the year with net losses of 409 million euros in the first quarter (February-April), something unheard of in almost 20 years.

El resultado neto supone un desplome del 70% respecto a lo obtenido en 2019, indicó el grupo propietario de ocho marcas, entre las cuales se destacan Zara, Berksha, Oysho, Stradivarius y Pull&Bear.

The group's sales also fell by 28%, although internet sales increased by 77% in 2020 from the previous year to EUR 6.6 billion (USD 7.85 billion), Inditex said in a report published Wednesday.

Faced with the forced closure of shops, Inditex doubled its efforts to accelerate digital transformation and online trade development with an additional budget of 2.7 billion euros between 2020 and 2022, in addition to the 2,500 invested since 2012.

It also expedited the process of reorganizing its shops, which consists of closing smaller establishments to concentrate on huge stores located in the most prestigious arteries of cities.

In 2020, 751 small establishments were closed but 111 large establishments opened, bringing their commercial network to 6,829 stores.

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-temporary workers sacrificed-

From a labour point of view, Inditex welcomed having been able to maintain almost all its personnel on a permanent contract, although it limited the recruitment of temporary workers to reinforce their staff during periods of high activity such as Christmas parties or rebates.

"all this hiring has not been possible," Pablo Isla lamented, without specifying the number of jobs that were not created. According to him, the textile giant is gradually beginning to recover these temporary workers.

The rebound of the virus and the consequent restrictions imposed in numerous places such as Germany, Brazil, Greece, Portugal or the United Kingdom slow down the expected reactivation this year.

At the beginning of March, 15 per cent of the group's stores were closed when, by mid-December, there were only 8 per cent. And sales in the first week of March fell 4% over the same period last year.

Still, Inditex hopes to have all its stores open before April 12 and expects a "significant" increase in sales.

For Natasha Cazin, a textile consultant at Euromonitors International, the group is "well positioned to recover in the near future", in part because of its investments in digital trade.

Inditex has also known "to diversify their product range to seduce consumers who are now more interested in caring for the person and who spend more time at home" with home clothes, pajamas and interior decoration items from their Zara Home brand, explains this analyst.

The group, founded by Amancio Ortega, has distributed dividends of 0.70 euros (0.83 dollars) per share.

On a day when the Madrid stock exchange advanced 0.34%, Inditex's share won 1.20%.

Los grandes grupos del sector textil se han visto impactados de lleno por las restricciones ligadas a la crisis sanitaria: el sueco H&M vio su beneficio neto dividido por diez en 2020, mientras que el japonés Fast Retailing, de la marca Uniqlo, sufrió una caída del 44% de sus beneficios en 2019-2020.

©2021 AFP