ZARA-OWNER Inditex’s sales jumped 11 per cent 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 arch rival H&M.

Shares in the world’s biggest fashion retailer rose 3.4 per cent to a record high in early on Wednesday trade after it reported the figures for Feb 1 to Mar 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 per cent 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 per cent to a record 36 billion euros (S$52.4 billion) in the year to January 2024.

The company’s results were in line with analyst 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 per cent.

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Inditex posted an annual net profit of 5.4 billion euros, up 30 per cent on the year and in line with analyst expectations in an LSEG poll, as the company maintained a gross margin of 57.8 per cent.

Inditex said it planned to invest 900 million euros per year through 2025 on logistics. It will spend a total of 1.8 billion euros this year to expand its store space by 5 per cent, and on technology and improving online platforms.

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

It said it would increase its dividend payout by 28 per cent to 1.54 euros per share, above analyst 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. REUTERS