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MADRID, Dec 14 (Reuters) – Zara owner Inditex ( ITX.MC ) posted a 24% rise in net profit for the first nine months of its fiscal year as rising prices helped offset weakening global demand for clothing.
The world’s largest fashion retailer’s store and online sales rose 19% from a year ago, slightly faster than analysts expected. It has raised prices by 5% or more since spring to offset rising costs.
The company’s net profit in February-October reached 3.1 billion euros ($3.3 billion), up from 2.5 billion euros a year earlier.
Inditex has performed well since Marta Ortega, daughter of founder-owner Amancio Ortega, took over as non-executive chairman in April.
Known for its ability to quickly deliver the latest designs to consumers thanks to its flexible resources, Inditex has recently offered more “high fashion” Zara pieces designed for special occasions.
The approach has allowed it to sell items at higher prices and attract buyers from the luxury segment of the market, according to company sources and analysts.
Sales rose 11% during the third quarter, at a slower pace than in previous months, reflecting a weakened consumer environment. The company’s sales for the second quarter were up 16% from the same period a year ago.
The fashion giant said its sales between early November and December 8 were up 12% from a year earlier. Sales were positive across all geographies, he added.
Analysts expect the company to face more cost increases in the coming months, including pressure from workers for higher wages.
About 1,000 shop assistants working at Zara and its other fashion brands went on strike on Black Friday in La Coruna, the company’s home city in northern Spain, to demand better wages, while others protested in Madrid the day before.
“The strikes that have been reported in Spain at Inditex stores suggest that there is further upward pressure on wage inflation,” said Deutsche Bank analysts Adam Cocharne.
These workers are planning to strike again the day before Christmas and in early January after rejecting a pay rise offered by Inditex until 2024. Two major local unions agreed on the new pay proposal.
Inditex’s main rival H&M ( HMb.ST ) became the first major European retailer to start laying off jobs this month in response to rising inflation and rising costs related to the war in Ukraine.
Reporting by Corina Pons, editing by Inti Landauro and Matt Scuffham
Our Standards: The Thomson Reuters Trust Principles.
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