Inditex, the global fashion giant widens its gap with H&M and GAP
Inditex’s performance in the last financial year leaves its international rivals behind. The Galician fashion group, the largest in the sector by turnover, has obtained the highest turnover and profit in its history in 2022. online, and in all chains. Inditex’s golden year, the first with Marta Ortega at the helm and Óscar García Maceiras alone, has been darker for its main competitors on a global scale: the American Gap has entered losses and H&M has still not reached pre-pandemic figures.
Specifically, the Galician company has ended the period (closed on January 31, 2023) with a turnover of 32,569 million euros, which represents an increase of 17.5% compared to 2021. The previous maximum, of 28,286 million euros, had registered it in 2019, before the outbreak of the pandemic.
All the company’s metrics have been positive: net profit rose 27%, to 4,000 million euros; Gross margin improved by 17%, to 18,559 million euros, and EBITDA increased by 20%, to 8,649 million euros. In addition, the company has managed to stabilize its inventory after the imbalances in the supply chain, with an increase of 5% compared to the previous year.
Marta Ortega’s Inditex is more Zara than ever
Marta Ortega’s Inditex is more Zara than ever. The chain, being the largest in terms of turnover, has been the one that has noticed its sales the most, up to 21%, and the one that has reduced its commercial area the least, a strategy that the group has followed in all its chains. Another of the group’s strategies is to grow in the United States, GAP’s local market. For the first time, America surpasses Asia in the sales pie of Zara’s parent, and grabs up to a fifth of the group’s business.
Although the company’s star strategy now involves putting the customer at the center. With the change in leadership, the focus of the business has shifted from operational efficiency to the store, product and consumer experience. “We don’t want to be fast, but agile and flexible; We don’t want to be big, but relevant”, says Marta Ortega, non-executive president of the Galician group, in a letter included in the group’s annual report, in which she also specified that the group’s model “revolves around design and product, the quality of our relationship with the client and our responsibility towards the environment”, drawing a revised fast fashion.
The tailwind does not seem to have reached its main rivals. In the 2022 financial year, H&M plummeted its profit by 67.6%, to 3,566 million Swedish crowns (319.2 million euros) and obtained its lowest historical margin, with the exception of the year of the pandemic. The company attributed the decline in profitability to the escalation of raw material costs and the strength of the dollar, which had a high impact on its purchases.
“We don’t want to be fast, but rather agile and flexible; we don’t want to be big but relevant”, says Marta Ortega
The company’s operating profitability fell from 7.7% to 3.2% in the last year and its real objective is to increase it to 10%. The Swedish group has launched a cost and efficiency program with which they expect to save some 2,000 million crowns (179 million euros) per year.
For the world’s third largest fashion group, the beads have been dyed red. Gap has returned to red numbers in the last financial year, with a loss of 202 million dollars. In the last financial year, ended on January 28 of this year, Gap had a turnover of 15,616 million dollars, which represents a decrease of 6% compared to the 16,670 million dollars of the previous year.
Gross margin stood at 34.3%, including a $111 million impact from inventory depreciation. The US company said the data was weighed down by depreciation in inventory and costs associated with the sale of 24 Old Navy stores in Mexico to Grupo Axo. Although if these extraordinary ones are excluded, the company lost 145 million dollars in 2022, with a 21% reduction in inventory.
The problems at Gap do not end in its income statement. The company is led internally by Bob Martin since the departure of Sonia Sygnal in the middle of last year. In the presentation at the beginning of March, the company already advanced that they were “close” to choosing their next delegate.
The ‘Spanish army’ in fashion
The growth of Mango and the dynamism of Tendam also strengthen the position of Spanish fashion in the international market. The company led by Toni Ruiz, number two in the sector in Spain, closed the 2022 financial year with a turnover of 2,688 million euros, its all-time high, and a net result of 82 million euros, the highest in almost a decade. “We are reaping the fruits of the work of years after three parenthesis exercises,” summarizes Ruiz.
For its part, Tendam, although it has not yet presented its annual results, predicts high growth. The company has closed the first nine months of the year (from March to November) with a turnover growth of 8.6%, up to 840.7 million euros, reaching its maximum sales in the period. For the fourth quarter, the company estimates double-digit growth across all channels, on a like-for-like basis.