Daily Brief: Inditex Passes The Buck

Daily Brief: Inditex Passes The Buck

over 1 year ago3 mins

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Zara-owner Inditex announced impressive results on Wednesday after some crafty price hikes.

What does this mean?

Inditex is just one of many retailers facing higher costs, but the world’s biggest clothing retailer’s been hiking its own prices to make up the difference. By no small amount, either: UBS data showed Zara’s prices were up 12% on average in July from the same time last year, overshooting inflation which hit 8.3% and 9.9% in the US and UK last month. Mix those (some would say greedy) price hikes with a super-strong US dollar, and the fast-fashion behemoth bulked its sales and profit by an expectation-beating 25% and 41% respectively over the six months leading up to the end of July versus the same period last year. And Inditex isn’t slowing down: the retailer told investors that sales from this August and the first week of September were up 11%.

Inditex results
Inditex results | Source: Inditex

Why should I care?

The bigger picture: The power to price.

Whether cheap-and-cheerful retailers or luxury stores are more able to weather inflation’s storm divides opinions. On one hand, price rises on lower-cost items might be small beer in absolute terms. But on the other, luxury brands can flex their “pricing power” – jolting prices without scaring off customers – more, since their clientele generally have higher budgets. But one thing’s for sure: brands that sit somewhere between the two can bank on neither smaller hikes nor fanatical brand loyalty, so they may have tougher months ahead.

UK inflation

Zooming out: It’s more than just pricing.

Inditex flies through its massive inventory, which is a life-saver in times like these: retailers with fast turnovers can push their prices up every time they release a new line. But because retailers tend to bump their inventory ahead of the shopping-heavy winter season, keeping stock flying out the door will be vital – especially if this selling season turns out to be as bad as some expect.

Keep reading for our next story...

The Musk-Twitter Saga Continues

Twitter image

Twitter shareholders approved its buyout this week, but the deal’s far from done.

What does this mean?

The once-hot Musk versus Twitter topic might not be trending anymore, but that doesn’t mean the drama’s cooling off. Musk – who pulled out of his Twitter buyout deal in July – has been battling the social media company and its lawyers ever since. And just as Twitter’s shareholders stamped their seal of approval this week, a whistleblower testified to the government that Twitter lacked basic security measures. In fact, they even claimed a spy had landed a job there and got their hands on precious data – potentially including accounts of senators in the room. Twitter can always rely on the “disgruntled ex-employee” card to discredit the fiery testimony, sure, but you can bet Musk will hope these slippy security stories will help him wriggle out of the deal.

Twitter stock

Why should I care?

Zooming in: Let’s all be friends.

Twitter’s board of directors is duty-bound to seek the best outcome for the company’s shareholders, which could include forcing the deal through. Musk, though, isn’t budging on his claim that Twitter withheld vital information about the platform’s number of bots. So maybe the two staunchly committed parties should consider compromising: Musk could easily up the $1 billion he promised to pay if the deal fell through, extra cash that would appease shareholders by funding the company’s recovery. Plus, skipping out the reluctant owner bit wouldn’t hurt either of them.

The bigger picture: Hear, hear.

Those Twitter-happy senators will have been listening very closely: lawmakers are already keen to enforce stricter regulations on big tech companies, so details of lackadaisical security practices may only hasten their clamp-down efforts. After all, if politicians tar all social media and tech companies with the same brush, any fallout from Twitter could affect the likes of Meta and Amazon too – and they’ve already faced more than their fair share of browbeating.

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