Who is Inditex? The Biggest Fast Fashion Group in the World

If you’ve heard of Zara, Zara Home, Oysho, Pull & Bear, Massimo Dutti, Stradivarius or Bershka, then you are familiar with how popular these fast fashion brands are. Inditex is no one else but their parent company and home to these 7 commercial brands.  The world’s biggest listed fast fashion company by sales, Inditex or Industria de Diseño Textil, S.A. is a Spanish multinational clothing company headquartered in Arteixo, Galicia, Spain. It operates over 7,200 stores in 93 markets worldwide.

Inditex will spend €1.8bn in logistics to increase sales growth

According to the Financial Times, Zara owner Inditex will spend around €2bn to create more logistics “muscle” in an attempt to boost sales growth. The news has pushed its shares to a record high.

The Spanish fashion group announced that it will spend nearly €1.8bn on distribution centres over the next two years to increase sales of shoes and clothes. While reporting on its plans, the group also highlighted how the current quarter started strongly with increased sales being up 11% between 1 February and 18 March and said its spring and summer collections had been a hit with consumers. Sales were up 8.6% year-on-year to €10.4bn in the three months to the end of January and the figures pushed the share price 5% higher.

That increase was a continuation of a rally that started last October and supported the stock price with a boost of almost 33%, reaching €43.13 on Wednesday (18 March).

Discussing the results, analyst James Grzinic, said they “confirm just how much stronger than the rest of its peer group” Inditex has become.

The company has been consistently increasing prices while focusing on more stylish designs in its attempt to beat its main competitor H&M.

Óscar García Maceiras, chief executive, highlighted and praised Inditex’s “rigorous” cost control in the past year. Expenses grew by less than sales and, in the final quarter, net income increased by 23.5% to €1.3bn, beating expectations.

The group’s big plans to invest more have been questioned by analysts who are doubtful about the company’s profitability. This “extraordinary” €1.8bn spend on logistics will be followed by another €1.8bn in 2024 which will be invested in opening 192 new stores, redecorating or expanding old ones, and renewing its ecommerce operation.

Inditex’s capital markets director Marcos López said the company was aware of the necessity to deliver “attractive” returns to shareholders and underlined that it was interested in investing “ahead of the cycle”. He told analysts that the company “should add muscle for future expansion, for future growth”.

The €1.8bn investment will help increase distribution centres for Zara, Bershka and footwear in Spain, and grow the existing Zara hub in the Netherlands. By the second half of 2025, the projects are expected to be operational. Zara has already 5,700 stores in more than 90 countries, but  García Maceiras said the aim was to improve the process of distribution so clothes can reach customers faster and easier, no matter where they are.

A dividend of €1.54 per share was announced for 2023, in line with market expectations.

Latest results

In 1Q 2024, Inditex continued with a strong operating performance with the Spring/Summer collections being well received by customers. Sales grew 7.1% and reached €8.2 billion. Sales in constant currency grew 10.6%, gross profit was up 7.3% to €4.9 billion. The gross margin had also increased 60.6% (+13 bps versus 1Q2023). Operating expenses increased 6.4%, but remained below sales growth. EBITDA increased 8% to €2.4 billion; EBIT was also up 10.3% to €1.6 billion and PBT 11.1% to €1.7 billion. Net income grew 10.8% to €1.3 billion. The strong operating performance resulted in a sharp increase in cash from operations.

Inditex continues to see strong growth opportunities. In the second quarter of 2024, store and online sales in constant currency between 1 May and 3 June increased 12% versus the same period in 2023.

Inditex remains focused on four key areas which will drive long-term growth: A unique fashion proposition, enhancing the customer experience, sustainability, and the talent and commitment of its people. At current exchange rates, Inditex expects a -2% currency impact on sales in FY2024.

In the fiscal year 2024, Inditex has set a target in terms of gross margin of +/- 50 basis points. This year investing in new resources is seen as necessary for extending the brand’s capabilities.

Owing to such future prospects, Inditex is undergoing a logistics development plan in 2024 and 2025. Unlike other forms of investment, this ambitious two-year investment program is aimed at the growth of the business and will cost up to €900 million for each of the financial years 2024 and 2025. The new investments will therefore be the most sustainable with the use of state-of-the art technology.

In respect of stores, Zara has opened new stores in new areas like the Zara Piraeus Tower in Athens (Greece). Also, they have undergone important expansions and restructuring in some of the most representative stores like Zara Rivoli Paris in France or Zara Skokie in Chicago U.S.A. They have also continued to open in relevant spots, for instance, Massimo Dutti in Cannes, France, Oysho in Stratford, London, United Kingdom, and Zara Home pop-up store on Rue du Bac, France.

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