Zara owner Inditex outshines H&M as sales top pre-pandemic levels

© Reuters. FILE PHOTO: A staff member sorts clothes inside a clothing store of Inditex's Zara brand at a newly opened shopping mall in Beijing, China April 16, 2021. REUTERS/Tingshu Wang/File Photo

By Corina Pons and Anna Ringstrom

MADRID (Reuters) -Fashion brand Zara owner Inditex (MC:ITX) has outpaced Swedish rival H&M in its efforts to bounce back from the coronavirus crisis, with second-quarter sales rising above pre-pandemic levels.

The world's biggest fashion retailer's sales in the quarter edged above levels seen before the pandemic as most stores reopened and people rushed to renew their wardrobe after store closures imposed to curb the spread of the virus.

Rival H&M's sales grew less than expected from a year ago in the three months through August, and remained lodged below pre-pandemic levels. H&M said lockdowns and restrictions hampered its development, particularly in Asia.

Inditex Executive Chairman Pablo Isla said that sales in stores and online were progressively recovering across all brands and markets, despite some restrictions in Asia due to the pandemic.

"We have had a strong start in the autumn winter season," he told a conference call. "Inditex competitive differentiation is bigger than ever."

Analysts said consumers have shifted their spending recently to focus on fashion workwear as big cities slowly return to normality and most lockdowns are lifted, a trend which is benefiting the Inditex brands, which include Zara and Massimo Dutti.

The Spanish company's second-quarter net profit of 850 million euros was higher than the 214 million euros ($181.14 million) booked in the same period in 2020 and 4% higher than the profit in 2019.

Inditex said sales accelerated in the May-July period to 6.99 billion euros, 7% higher than in the same period in 2019, as shoppers started buying clothes again for summer social events.

The sales during the second quarter were in line with the 7.02 billion euros expected by analysts polled by Refinitiv.

Inditex said shop and online sales at constant exchange rates between August and the first week of September were 22% higher than a year ago and 9% higher than in the same period of 2019.

Although fashion retailers are recovering from the pandemic, the spread of the Delta variant means some restrictions have been reintroduced, while many industries, including fashion, face supply problems due to a shipping container shortage and other bottlenecks.

NEW PARIS STORE

Shares in H&M, which reports fuller quarterly figures at the end of the month, traded 3.3% lower at 0940 GMT, while Inditex slipped 1.6%.

During the pandemic, Inditex strengthened its digital retail platform and shut its smaller outlets worldwide in favour of expanding flagship stores able to function as mini distribution hubs.

Inditex said 99% of all of its stores have reopened and is currently operating 6,654 stores worldwide compared with 7,337 stores a year ago.

Chairman Isla said one of its biggest Zara stores will open in Paris by October and its Uterque brand will integrate into Massimo Dutti stores by next year, under a digital transformation strategy that he said was being accelerated.

Inditex online sales rose 36% in the first half compared with the same period in 2020, when restrictions on mobility in key markets including Britain, Germany and France forced shoppers to buy from home.

The company expects online sales to exceed 25% of total sales this year and it will launch a men's sports collection under the name Zara Athleticz at the end of September.

($1 = 1.1814 euros)