Whatās Going On Here?Inditex ā the worldās biggest clothing house ā announced on Wednesday that it finally made more in profit last quarter than it did before the pandemic. What Does This Mean?Letās face it, the dream is over: you had no choice but to start wearing pants ā or as we call them, leg prisons ā once lockdowns came to an end. So youāve been rushing in your droves to the likes of Massimo Dutti, Pull&Bear, and fast-to-market brand Zara, which helped parent company Inditex bring in 36% more revenue and 80% more profit last quarter than the same time in 2021 (tweet this). Demand was so high, in fact, that Inditex was able to navigate two potentially disastrous pitfalls. For one thing, it was able to offset the 24% rise in operating costs by upping its prices without losing customers. And for another, its strong showing in the UK, the US, and Europe made up for the closure of over 500 stores in Russia ā its second-biggest market by real estate. Why Should I Care?Zooming in: If you canāt beat āem, buy āem.
Despite a tough time during the pandemic, Inditex has now amassed a cash pile of around $10 billion. And while hoarding cash has always been part of its playbook, analysts are speculating that it could be eyeing a big purchase in the form of struggling German online retailer Zalando. That could be a shrewd move, both because it would eliminate a competitor and allow Inditex to profit from the companyās digital know-how. It wouldnāt break the bank either: Zalandoās shares have halved in value since January.
The bigger picture: Inditex goes shabby chic.
Fast fashion and the environment arenāt exactly happy bedfellows, but Inditex is trying to change that: the company agreed last month to buy 30% of the recycled fiber produced by Finlandās Infinited Fiber Company for three years in a deal worth $100 million. Itās all part of a broader push toward more sustainable materials that should see Inditex making outfits entirely out of clothing waste from 2024. | 