Zara-owner Inditex’s sales jumped 11 percent at constant currencies in the first half of its spring season, boosted by upmarket fashions and continuing the strong momentum that saw its 2023 sales growth top that of rival H&M.

Shares in the world’s biggest fashion retailer rose as much as 4.4 percent to a record high in early Wednesday trade after it reported the figures for Feb. 1 to March 11.

The Spanish group has widened its lead over Sweden’s H&M thanks to its ability to deliver trends faster from nearby suppliers and sell more clothes at higher prices. That has also helped it counter fast-growing Chinese rival Shein.

In January, H&M reported a 4 percent drop in December and January sales, a bad sign for the key Christmas shopping period. German online fashion retailer Zalando on Wednesday reported a full-year decline in sales.

Inditex’s sales rose 10 percent to a record €36 billion ($39 billion) in the year to January 2024.

Sales Growth Slows

The company’s results were in line with analysts’ expectations but its sales are growing more slowly than a year earlier, as the pace of price increases has moderated. In the first half of spring 2023, its sales rose 13.5 percent.

Inditex posted an annual net profit of €5.4 billion, up 30 percent on the year and in line with analysts’ expectations in an LSEG poll, as the company maintained a gross margin of 57.8 percent.

Inditex said it planned to invest €900 million per year through 2025 on logistics. Those plans include new logistics centres in Zaragoza in Spain and the Netherlands, chief executive officer Oscar Garcia said during an analysts call.

It will spend a total of €1.8 billion this year to expand its store space by 5 percent, and on technology and improving online platforms in 2024.

The US is Inditex’s second-largest market after Spain, and Inditex plans to continue growing there with new store openings in Los Angeles and Las Vegas, as well as by expanding its second-hand business, Garcia said

“The US is a key market for us,” he said.

Dividend Boost

The company had 5,692 stores worldwide in 2023, 123 fewer than a year earlier, and said its inventories in January were 7 percent lower year-on-year, in part due to the “normalisation in supply chain conditions”.

Inditex said it will increase its dividend payout by 28 percent to €1.54 per share, above analysts’ expectations.

Inditex’s core brand Zara began to raise prices earlier than H&M in response to surging inflation and as part of a shift to offer special, high-fashion pieces, while growing other brands in its budget range.

But over the last two years, Zara has increased average prices season-over-season at a slower pace than H&M and others, according to retail intelligence company EDITED.

Investors expect Inditex to continue to outperform H&M. The Spanish group’s share price trades at 21.8 times expected earnings for the next 12 months, while H&M’s ratio is 16.1.

“Inditex achieved the most difficult thing, which was being able to grow while passing on inflation in 2023. It did it because it has a better value proposition than competitors like H&M,” said José Ramon Iturriaga, fund manager at Abante Advisors, which holds Inditex shares.

“I don’t think this year will be more any more difficult for Inditex,” he added.

By Corina Pons and Charlie Devereux; Editors: Rashmi Aich, Mark Potter and Sharon Singleton

Learn more:

Investors Push Zara Owner Inditex to Publish Full Supply Chain

Inditex is an outlier among big clothing retailers in not publishing which factories it sources from. Regulators and investors want greater transparency and better disclosure from companies.