Inditex SA is stepping up its omnichannel efforts.
In reporting sharp rises in profits and sales for fiscal 2015, the company revealed plans to slow down the growth in its physical store network to focus more on omnichannel efforts.
During an analyst call, group chairman Pablo Isla and his team lowered their guidance for retail space growth in 2016 to 6 percent to 8 percent from 8 percent to 10 percent as the company beefs up its omnichannel offer.
Ignacio Fernández, chief financial officer of Inditex, stressed during a call that the growth profile of the company was not changing, but rather Inditex believed in a “fully integrated approach” to sales, and added that its customer is increasingly relying on all shopping channels.
“The business is so fully integrated now that more than one-third of online orders are delivered in-store and two-thirds of online returns happen in-store. Customers can now buy online in our stores if they cannot find their size, for example,” he said.
The group ended fiscal 2015 with an online sales presence in 29 markets, including new platforms in Hong Kong, Taiwan, Macau and Australia. Its global network of brick-and-mortar stores was 7,013 across 88 markets at the end of the year.
In 2016, Inditex said the brands’ online reach would expand, with platforms already active in Croatia, Slovakia and the Czech Republic and plans to launch next week in Bulgaria, Finland and Hungary.
Over the course of the year, all Inditex brand concepts will be online in all European markets and Turkey.
Inditex will also launch in five new markets this year with brick-and-mortar stores. Those markets are New Zealand, Vietnam, Nicaragua, Paraguay and Aruba.
Capital expenditure in the current year will around 1.5 billion euros, or $1.65 billion at current exchange. The company flagged “huge growth potential” especially in western and eastern Europe, and “strong long-term potential in Asia.”
Isla called 2015 “a year of very strong execution for Inditex globally, with satisfying sales growth, tight cost controls and significant investments.”
He said the earnings figures “demonstrate the group’s potential, boosted by the quality and the commitment of all of its employees.”
Europe’s largest clothing retailer and parent of brands including Zara, Massimo Dutti and Bershka saw its profit for the 2015 fiscal year climb 14.9 percent to 2.88 billion euros, or $3.17 billion, on the back of double-digit sales gains and growth across all geographies and formats.
Sales rose 15.4 percent to 20.9 billion euros, or $23.2 billion, fueled by a combination of store openings — a net 330 units across 56 markets — and an 8.5 percent uptick in like-for-like sales.
The company said all of its brands had posted positive like-for-like growth in the 12 months to Jan. 31. Zara accounts for two-thirds of the company’s sales while the smaller brands, which are mostly aimed at a younger audience, generate the remaining one-third.
All figures have been translated at average exchange rates for the 12-month period.
Sales momentum has continued into the first quarter of the new year, with store sales up 15 percent in constant currency in the weeks from Feb. 1 to March 7, including an extra day of trading due to leap year.
Asked during the call about growth in specific markets, Isla and Fernández said business in Russia was strong in local currencies, while Spain notched 8 percent like-for-like sales growth in 2015.
In response to a question about whether Inditex planned to open stores in Iran, the company said there are no projects in the works, although it could be a potential opportunity.
During the 2015 fiscal year, the group invested 1.52 billion euros, or $1.67 billion, in international expansion and the growth and modernization of its logistics facilities and design centers in Spain.
The company noted that it has committed more than 1 billion euros, or $1.1 billion, in buying “cutting-edge technology” to support its logistics services, including automated storage and retrieval systems aimed at speeding up processing and dispatches.
It has also invested in RFID technology to enhance stock management in stores. By the end of this year the technology will be installed in Zara’s more than 2,000 stores worldwide.
The company also offered up some good news for shareholders, a 0.60 euro, or 66 cent, dividend, up 15.4 percent over last year.
In a flash report following the Inditex announcement, Barclays called current trading “robust” and speculated that the reduction in space growth guidance may weigh negatively on the share price.
Earlier the day, the shares rose 2.5 percent to 30.50 euros, or $33.60. They ended the day up 2 percent to 30 euros, or $33.05.