Spanish retail giant Inditex, the parent company of Zara, reported another record annual profit on Wednesday, yet concerns over potential US tariffs impacting future growth has led to a drop in the company’s share price. ALSO READ: EU hits back against US tariffs with ‘countermeaures’.
The retail group, which also owns brands like Massimo Dutti, Pull & Bear and Bershka, recorded a net profit of €5.87 billion for the fiscal year ending 31 January. This marked a 9% increase from the €5.38 billion profit in 2023, making it the company’s third consecutive year of profit growth.
In a statement, Inditex attributed the profit increase to ‘very satisfactory’ sales growth of 7.5%, which brought revenue to €38.6 billion in 2024, along with a ‘rigorous’ cost control strategy.
Despite the challenging global environment, Inditex remains ‘optimistic’ about future growth, said chief executive Oscar García Maceiras during a press conference.
However, the company’s sales growth slowed in the first quarter of the new fiscal year, rising only 4% between 1 February and 10 March. This is a significant drop from the 11% growth reported during the same period last year.
According to UBS analysts, this represents the slowest sales growth for the company during this time frame since 2016.
The deceleration comes as Inditex faces intensified competition from low-cost Asian online retailers like Shein, alongside the looming threat of increased tariffs in the United States, its second-largest market after Spain.
Inditex’s shares dropped 8.2% in early afternoon trading on the Spanish stock exchange, falling to €44.66 per share.
While acknowledging Inditex’s strong performance in the clothing retail sector, Deutsche Bank warned that the latest figures indicate ‘growth is slowing’. The bank also highlighted that ‘the potential risks of US tariffs are also weighing on Inditex sentiment’.
Addressing these concerns, Maceiras emphasised the company’s adaptability. ‘We have enormous diversification in terms of manufacturing origins,’ he said, adding that Inditex is ‘well positioned’ to handle the trade tensions and is open to producing some garments in the United States if ‘opportunities’ arise.
To counter rising competition from budget fashion brands like Shein, Zara has shifted its focus to appeal to more premium shoppers by offering higher-end products.
Inditex is also enhancing its logistics to expedite online deliveries and investing in larger, modern stores while closing smaller outlets.
Meanwhile, Inditex’s main competitor, Swedish fast-fashion giant H&M, reported lower sales in 2024 due to supply chain issues and increasing pressure from Chinese online retailers.
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