What’s going on here?
European clothing colossus Inditex gave a masterclass in pulling off tidy quarterly results on Wednesday.
What does this mean?
When the going gets tough, the shoppers stop spending. But Inditex – the clothing powerhouse that owns the likes of Zara, Pull&Bear, and Massimo Dutti – is showing just how to keep the cash rolling in. The fashionista has ruthlessly shut down its less profitable stores, with its total tally of shopfronts falling 17% since 2019, focusing its attention on zhuzhing up the money-making ones instead. And despite cheaper online rivals like Shein racking up more market share, Inditex’s lifted prices of its cheaper offerings up roughly 20% in the past year. So even though its Russian business is kaput and labor costs are on the rise, Inditex still hoisted profit up a better-than-expected 54% last quarter from the same time last year.
Why should I care?
Zooming in: Time for a shopping spree.
Inditex’s stock flew up after the news, bringing the firm’s market value way above $100 billion. And with a cash pile of over $11 billion, Inditex has plenty to splash on future-fueling investments. The company’s already investing in tech to improve the in-store shopping experience (read: make folk buy more, faster), like self-scanning checkouts and new security systems that could whittle down long queues. Plus, the world’s biggest clothing retailer plans to open 30 more US stores – a lightly treaded market for Inditex – in the next two years.
The bigger picture: Euro-no.
Inditex isn’t alone, mind you: European stocks have held up pretty well this year compared to the rest of the world. But the prospect of a strengthening euro – a result of continued rate hikes in Europe while rates elsewhere start to level out – could spoil the fun. See, plenty of the region’s top firms make major money stateside, and converting that back into a stronger euro will dent their takings – and potentially their stocks too.
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