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Inditex Q2 gross margin up six per cent

Inditex gross margin grew six per cent year-on-year to 59.5 per cent in the second quarter, as foreign currency effects moved back into favor after two years of nibbling away at profitability. Sales were up five per cent. The company bounced back from a weak start to 2019. Unseasonably cold weather in Southern Europe had stifled sales for the Spanish fashion group, the world’s biggest clothing retailer and owner of Zara, Massimo Dutti, Bershka and Oysho.

Inditex generates more than half its sales in other currencies that have to be converted back into euros when it reports. Those currencies have strengthened slightly against the euro compared to a year ago, on average, helping reported sales. With the adverse foreign exchange effects removed, Inditex is under pressure to show it can deliver strong like-for-like sales without the margin dilution that has affected others. With less impact from foreign exchange, this will be an important year to prove the concept.

The apparel sector has been hit by out-of-season sales as savvy shoppers expect discounts and hunt for online bargains. Britain had its biggest fall in retail sales on record in May. Boohoo’s shares fell, despite the online British fashion retailer reporting robust sales, as lower margins disappointed investors.

 
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