Zara's revamped flagship in Milan.

PARIS — Zara owner Inditex reported sales are improving despite ongoing store closures in key markets, but its end-of-year performance fell below analyst expectations.

Sales were down 4 percent in the first week of March, and down 15 percent for the month of February, showing improvement from a 28 percent decline for the year ending Jan. 31.

Excluding the five major markets where lockdown measures are in place — Germany, Brazil, Greece, Portugal and the U.K. — sales were up 2 percent in the first week of March, offering a snapshot of consumer demand.

Inditex as a company is stronger today than it was two years ago, with a unique business model and a global, flexible, digitally integrated and efficient sales platform,” Inditex executive chairman Pablo Isla said in a statement. Isla added that the digital efforts place the company “in an excellent position for the future.”

Analysts, who have been forecasting a modest pace of recovery for the fast-fashion industry, were disappointed by the retailer’s annual results but were more optimistic about the more recent figures.

The last quarter “looks soft,” said Richard Chamberlain of RBC Europe.

Analysts at Berenberg ticked off a series of “misses,” noting that a fourth-quarter sales decline of 25.4 percent missed the consensus estimates by 8 percent, while earnings before interest and tax, at 561 million euros, missed expectations of 939 million euros.

But the more recent performance offered a brighter picture, analysts said. Bernstein, which highlighted the “stellar” online growth at Inditex, noted an improved outlook for the first quarter with only 15 percent of stores closed and possible reopening by mid-April.

Inditex “should see strong pent-up demand coming through when stores increasingly open and operate without restriction through the course of the year,” Chamberlain said.

The Spanish fast-fashion retailer, which also owns labels Massimo Dutti, Bershka and Stradivarius, has been drawing on its digital prowess to navigate the pandemic. It reported 1.1 billion euros in annual net profit, a 70 percent decline compared to the previous year.

Inditex turned the corner in the second quarter, bouncing back from a loss at the start of last year.

Annual sales came to 20.4 billion euros, a 25 percent decline excluding currency impact. The performance was spurred by online sales, which rose 77 percent in local currencies to 6.6 billion euros. The company, which has sped past rivals on the digital front, has been expanding internationally, and launched online sales platforms in 25 new markets, while opening stores in 29 new markets.

Inditex has rapidly rolled out an integrated stock management system in thousands of stores around the world, a move the company flagged as playing a key role in helping it continue to generate business during the pandemic.

Rival H&M, reported expectation-beating end-of-year results at the end of January, but company projections were weaker than expected as store closures continue to weigh.

In a conference call with analysts, Inditex executives stressed the recent improvement.

“Remember what was happening in the months of September and October, as soon as our stores reopened, the level of sales was moving to the same level of the previous year, even with the restrictions,” said Isla, stressing the company’s integrated system of online and in-store stocks.

“It is clear that as soon as we are able to reopen the stores, this combination is very strong between the store sales and online, in a very integrated way,” he said.

Last year’s widespread pandemic lockdowns showed the company can function even when physical traffic has been restricted, he added.

“We can say that as a company of course we can do everything online, online sales can increase, we controlled cost evolution and we ran the company in an efficient way. We have seen that the only thing that we cannot do is to sell in the stores when the stores are closed because of the pandemic, but as soon as the stores reopen the level of sales becomes very healthy,” Isla said.

The company is advancing as planned on its store-culling efforts, particularly in Spain where it expanded widely in the 1980s and ’90s, executives also said. Inditex has been closing smaller stores — more than 1,000 over two years — in order to focus on larger flagships, which are outfitted with RFID tracking technology.

Rental expenses are expected to decrease as a percentage of sales, executives noted, adding they still want to keep good relations with landlords.

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