Clothes But No Cigar For Zara-Owner Inditex

Clothes But No Cigar For Zara-Owner Inditex

9 months ago2 mins

Investors weren’t keen to reward Inditex for the new investment plans it announced on Wednesday.

What does this mean?

Inditex has been weeding out its weakest stores in recent years, and boy, has that paid off. The store network was super-efficient last year, helping profit jump by 27% from 2021, as sales shot past pre-pandemic levels. That meant Inditex’s pivot from streamlining to spending was pretty unexpected, though, with plans to expand its fleet of stores catching investors off guard. And while the almost $2 billion Inditex is setting aside for the project won’t crater its $10 billion cash reserves, shareholders might have been hoping more cash would come their way. After catching wind of a mere 29% dividend bump, even the popularity of Inditex’s current spring-summer collections couldn't please them, and shares took a tumble.

Inditex cash pile

Why should I care?

The bigger picture: American dream.

Investors might be giving the company a hard time, but it’s not doing too badly – especially in light of rival H&M’s recent crummy results. That’s partly down to Inditex’s wealthier customers, who can bear price hikes better than some – but the firm’s vision is an asset too. This store expansion plan, which could take Inditex to a whole new level, is a case in point. Imagine the inroads Inditex could make in the US, where the company has fewer than 100 stores and a market share of just 0.5%.

Inditex stock
Source: Google Finance

Zooming out: Jean Genie.

Spare a thought for the environment as you refresh your wardrobe this spring: after all, making one pair of jeans can take as much water as the average person drinks in 10 whole years. Luckily, though, Inditex and H&M are both taking steps to reduce waste – and make some extra money too. Part of Inditex’s investment plan involves expanding a platform for secondhand clothes in Europe, and H&M launched its own resale platform in the US this week.



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