Inditex insists China remains ‘core’ market despite Covid disruption
Inditex, the global fashion group that owns Zara, has insisted that China remains a “core” market for the retailer after a year when zero-Covid restrictions have hit consumption in the country.
Óscar García, who became Inditex’s chief executive in April this year, said: “China has been challenging this year due to the rolling restrictions across the country . . . But we remain absolutely confident about our opportunities there in the medium to long term.”
He said demand for fashion continues to be strong in the country, which is grappling with a coronavirus outbreak that has worsened since it announced a loosening of President Xi Jinping’s contentious zero-Covid restrictions.
“For sure it will remain a core market for us,” García said.
Inditex does not release a breakdown of sales in China, but at the start of this year 303 of its roughly 6,500 stores were in the country. Its largest market is Spain, where it had nearly 1,300 stores in January.
Although three years of Chinese lockdowns and quarantines, plus tensions between China and the west, have prompted some manufacturers to rethink the country’s role in their supply chains, there have been fewer signs of multinationals turning away from it as a consumer market.
García was speaking after Inditex posted an 11 per cent increase in quarterly sales globally, but more modest profit growth as the cost of goods rose in a weakening global economy still racked by inflation.
The group on Wednesday said sales hit €8.2bn in the three months to the end of September while the cost of sourcing its clothing rose slightly faster, increasing 13 per cent from a year ago to €3.2bn. The company said its control of operating expenses was “rigorous”.
Net profit for the quarter was up 6 per cent to €1.3bn at the retailer, whose brands include Massimo Dutti and Bershka.
In an update on its most recent performance, it said store and online sales surged 12 per cent from the previous year between November 1 and December 8 2022.
After announcing in October that it had reached a provisional deal to sell its Russia business, a large operation comprising 502 stores, it said it had taken an additional €14mn charge to cover the cost of the exit following a previous €216mn hit.
The Russia business is being taken over by Daher, a group based in the United Arab Emirates with various retail and real estate investments including shopping malls.