INDITEX : Results English , PDF, 0.35MB

FY2021 RESULTS

1 February 2021 to 31 January 2022

• Inditex continues to expand its global, fully integrated platform underpinned by the key strategic pillars of store & online integration, digitalisation and sustainability
• In 2021, Inditex had a strong operating performance. Sales reached €27.7 billion (+36% versus 2020). Sales in constant currencies increased 37%. Online sales increased 14% to reach €7.5 billion, 25.5% of total sales in 2021
• Gross profit increased 39% to €15.8 billion. The gross margin reached 57.1% (+123 bps versus 2020), the highest in 6 years
• All expense lines have shown a favourable evolution. Operating expenses increased 26%, below sales growth
• Store optimisation is in the final stages as planned and has been a resounding success
• EBITDA reached €7.2 billion (+58%), EBIT €4.3 billion (+184%) and PBT €4.2 billion (+200%)
• Net income reached €3.2 billion (+193%)
• Cashflow reached historic highs. Strong free cash flow generation continued. The net cash position grew 24% to €9.4 billion
• Inditex's dividend policy of 60% ordinary payout and bonus dividends remains in place. The Board of Directors will propose to the AGM a dividend of €0.93 per share (+33%), composed of an ordinary dividend of €0.63 and a bonus dividend of €0.30 per share. The dividend will be made up of two equal payments: On 2 May 2022 a payment of €0.465 per share (ordinary). On 2 November 2022 a payment of €0.465 per share (€0.165 ordinary + €0.30 bonus)
• The Board of Directors is also proposing to the AGM a total bonus dividend of €0.40 per share to be paid in relation to FY2022 results
• Spring/Summer collections have been very well received by our customers. Store and online sales in constant currency from 1 February to 13 March were 33% above 2021 and 21% above the historic pre-Covid highs of 2019. In this period, sales in the Russian Federation and Ukraine represented approximately 5 percentage points of sales growth

Performance in FY2021

Inditex continues to expand its global, fully integrated platform underpinned by the key strategic pillars of store & online integration, digitalisation and sustainability.

In 2021, Inditex had a strong operating performance. The year was defined by a progressive normalisation of sales and our strong differentiation. The table below shows the full year results:

€ million	2021	21/20
Net sales	27,716	36%
Gross margin	15,814	39%
EBITDA	7,183	58%
Net income	3,243	193%

Net sales reached €27.7 billion, +36% versus 2020. Sales in constant currencies increased 37%. To provide a better comparison with pre-Covid levels, sales in constant currency grew 3% versus 2019 (-2% in 1H and +7.5% in 2H).

The sales volumes were achieved with 5% less stores in operation versus 2020 (13% less versus 2019). The store optimisation programme has therefore been a resounding success.

The following graph illustrates the sales growth versus 2019.

In 1Q2021, with 24% of trading hours still unavailable due to restrictions, Inditex's sales trends improved markedly due to healthy store sales productivity and online sales growth.

With a more normalised trading environment in 2Q2021 and 3Q2021, sales, PBT and net income reached record highs. It is especially noteworthy that store sales in 3Q2021 increased versus the record levels set in 2019, with 11% fewer stores in operation.

This performance continued going into 4Q2021. However, the final part of the year was impacted significantly by the decrease in store traffic due to the spread of the Omicron variant, restrictions in most markets and lockdowns in Austria, The Netherlands, Germany, Japan, China and the Philippines.

The sudden drop in store sales generated a one-off impact of €400 million in 4Q2021. The impact on the gross profit due to increased markdowns as a result of the outbreak

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was approximately €210 million. Due to the sudden drop in store sales, it was difficult to compensate the incremental store expenses associated with the Christmas season and the additional costs linked to increased online sales. The impact from this was a further €190 million.

Following a decrease in the cases of the Omicron variant and the end of restrictions, the start of the Spring/Summer season 2022 has returned to the previous positive patterns.

Global Online

Online sales came to €7.5 billion and grew 14% to reach 25.5% of total sales. Customer engagement remains very high. Active App's reached 146 million. Online visits in FY2021 have grown 13% to 6.2 billion visits. The Group has 228 million followers on social media.

The RFID and SINT programmes have now been fully rolled out in all concepts. This has allowed Inditex to transition into a company that is more responsive, adaptable, and agile. The migration to the Inditex Open Platform (IOP) is now complete.

Store & Online sales by geographical area are shown in the table below:

Area	2021	2020
Europe ex-Spain	48.4%	48.7%
Asia & RoW	19.7%	23.2%
Spain	14.4%	14.6%
America	17.5%	13.5%
Total	100.0%	100.0%

In 2021, the USA became the largest market for Inditex after Spain.

Net sales by concept are shown in the table below:

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Concept	2021	2020	21/20
Zara (Zara and Zara Home)	19,586	14,129	39%
Pull&Bear	1,876	1,425	32%
Massimo Dutti	1,653	1,271	30%
Bershka	2,177	1,772	23%
Stradivarius	1,824	1,283	42%
Oysho	600	522	15%
Total	27,716	20,402	36%

Gross profit increased 39% to €15.8 billion. The gross margin reached 57.1% (+123 bps) and is the highest in 6 years.

The implementation of efficiencies has resulted in operating expenses increasing 26%, being tightly managed over FY2021, below sales growth.

Million Euros	2021	2020	21/20
Personnel expenses	4,179	3,376	24%
Rental expenses	519	181	187%
Other operating expenses	3,898	3,250	20%
Total	8,596	6,807	26%

EBITDA reached €7.2 billion (+58%), EBIT came to €4.3 billion (+184%).

A breakdown of financial results can be found in Annex VI.

Results from companies consolidated by the equity method came to €58 million.

PBT increased 200% to €4.2 billion. The PBT to sales in each of the concepts exceeded 15%. The breakdown of profit before tax by concept is shown below:

FY2021 Results	4

	PBT by concept (€m)
Concept	2021	2020
Zara (Zara and Zara Home)	2,890	971
Pull&Bear	317	95
Massimo Dutti	250	63
Bershka	321	113
Stradivarius	332	117
Oysho	89	43
Total PBT	4,199	1,401

Net income increased 193% versus 2020 to €3.2 billion.

In 2021, cashflow reached historic highs. Strong free cash flow generation continues. The breakdown of the cashflow is shown below. The cash lease payments fixed charge has been added back.

Cash flow summary	2021	2020	2019
Funds from operations (1)	6,530	3,864	6,695
Lease payments fixed charge (2)	(1,668)	(1,673)	(1,836)
Funds from operations (1+2)	4,862	2,191	4,859
Change in working capital	223	(847)	205
Cash from operations	5,085	1,344	5,064
Capital expenditure	(1,126)	(713)	(1,122)
Free Cash Flow	3,959	631	3,942

The net cash position increased 24% to €9.4 billion at FYE 2021.

Million Euros	31 January	31 January
2022	2021
Cash & cash equivalents	7,021	7,398
Short term investments	2,374	176
Current financial debt	(35)	(11)
Non current financial debt	(1)	(3)
Net financial cash (debt)	9,359	7,560

Closing inventory increased 31%. The high quality of inventory is reflected in the strong 2022 trading update. Due to Covid-19 (30% of stores temporarily closed) inventory levels at FYE2020 were unusually low. Inditex has decided to accelerate inventory inflows for the Spring season with any change to commitment levels in order to increase product availability in the face of possible supply chain tensions.

Million Euros	31 January	31 January
2022	2021
Inventories	3,042	2,321
Receivables	842	715
Payables	(6,411)	(4,747)
Operating working capital	(2,526)	(1,711)

Capital expenditure for FY2021 amounted to €1.1 billion.

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