Inditex, the owner of the Zara, Massimo Dutti, Pull&Bear and Bershka clothes chains, says it will invest €1bn over the next two years to step up its focus on online shopping and another €1.7bn in opening more large stores and closing up to 1,200 smaller ones.
The Spanish group reported an underlying first-quarter loss of €175mln after being forced to shut 88% of its stores in the three months to end-April because of the coronavirus.
As of 8 June, 5,743 stores, representing 78% of the total were open across 79 countries.
After taking a €308mln provision meant it reported a net loss of €409mln.
Sales at constant currencies in the quarter fell 44% year-on-year to €3.3bn and since then have dropped 51% in May and eased to 34% in the first week of June.
This was helped by online sales growing 50% during the first quarter, with a 95% increase in April.
Net cash remained impressive at €5.8bn, though down from €6.7bn a year earlier, and the board said it will pay a dividend of 35 cents per share for last year, with a promised a 78 cents special dividend to be paid in 2021 and 2022.
Executive chairman Pablo Isla said he expected online sales to account for more than a quarter of the group total by 2022, compared to 14% now.
He said the headcount will remain stable and that portfolio of larger stores will be concentrated on strategic shopping districts in larger cities, with “higher levels of profitability, and helping generate 4-6% like-for-like growth annually”.
The shares were up 1.5% to €26.06 in Madrid on Wednesday morning.
Sophie Lund-Yates, analyst at Hargreaves Lansdown, said: “Lockdown is accelerating existing trends, forcing retailers to acknowledge the digital age has dawned. The Zara owners were already working towards improving their online capabilities but lockdown has ushered in a new urgency."
She said the bigger digital-savvy shops won’t just help sales, but further boost inventory management too: "It’s already far more reactive than its peers when it comes to supply chains and manufacturing. In fact despite the mass store closures, inventory levels fell 10% in the first quarter, which is in stark contrast to the likes of M&S or Primark who have been lumbered with swollen piles of stock."
She also noted Inditex’s renewed focus on sustainable fashion. "Consumers are becoming ever-more socially conscious, and staying ahead of any potential wide-scale backlash against fast fashion is a very sensible move.”