Zara owner Inditex’s 2020 profits slump on virus hit

Zara owner Inditex said Wednesday its profits plunged in 2020 as a surge in online sales failed to make up for enforced store closures due to the coronavirus pandemic.

The Spanish textile giant, which also owns the Bershka and Massimo Dutti brands, recorded a net profit of 1.1 billion euros ($1.3 billion) last year, a 70 per cent drop over 2019.Total sales were down 28 per cent from last year at 20.4 billion euros, as lockdown restrictions forced the closure of stores around the world, it said in a statement.

At one point last year nearly 100 percent of Inditex's stores were closed as nations imposed strict lockdown measures to curb the sprad of the virus, Chairman Pablo Isla told a news conference.

Only 18 per cent of its stores were operating normally as of January 31 when Inditex's fiscal year ends, he added. Thirty percent were closed in countries like Britain that reintroduced lockdowns while the rest faced restrictions such as limits on the number of customers that can be inside at a time.

Inditex, which operates nearly 7,000 stores worldwide, expects almost all stores to be open again by April 12.Total sales were down 28 percent from last year at 20.4 billion euros including 6.6 billion in online sales -- an unprecedented 77 percent increase over 2019. "Inditex has emerged stronger after such a challenging year," Isla said.

The company was late to online sales with Zara, its flagship brand, opening its first store online in 2010.But Inditex has since sought to quickly made up for lost time. It has spent 2.5 billion euros since 2012 to develop online sales and the company said Wednesday it plans to invest another 2.7 billion euros between 2020 and 2022.Inditex also said it had stepped up its restructuring of its shops, with the closure of 751 smaller shops and the opening of 111 flagship locations.

Euromonitor analyst Natasha Cazin said the company was  "well positioned to rebound in the near future" thanks in part to its massive investment in online sales. The company has also managed to  "diversify its line of products to attract consumers who are now more interested in self care and who spend more time at home" such as comfortable home wear and interior decoration items.

Inditex posted a net loss of 409 million during its first quarter which runs from February to April, its first quarterly loss in nearly two decades, as the country grappled with the first wave of the pandemic which brought the global economy to a virtual halt. Shares in Inditex closed up 1.20 per cent, outperforming Spain's Ibex-35 index which ended up 0.34 per cent.