Industria de Diseño Textil S A : Results English , PDF, 0.38MB

FY2020 RESULTS

1 February 2020 to 31 January 2021

2020: A year marked by the pandemic and key in Inditex's strategic transformation

Inditex would like to express solidarity with the people affected by the Covid-19 pandemic. Our main priority is the health and safety of local communities and employees. We would like to express our gratitude to our dedicated teams who have been an inspiration during this period.

A landmark year in Inditex's transformation into a fully integrated, digital and sustainable business model. Key features:

•  Total integration of Stores and Online.

•  100% implementation of RFID & SINT (single inventory) in all concepts. The Inditex Open Platform (IOP) is 80% implemented. Rollout to be completed by the end of FY2021. Construction of the new Zara online studios (67,000m2) now completed.

•  Online sales in constant currencies increased 77%.

•  SINT contributed €1.2bn to online sales.

•  Gross new space in prime locations increased 2%. Store optimisation is in the final stages as planned (751 stores absorbed in 2020).

•  Strong customer engagement. Online visits reached 5.3 billion, +50%. The Group has 200 million followers on social media. Active App's reached 132 million.

•  Higher flexibility and lower inventory requirement to sales continues.

•  Sustainability is a key part of Inditex's strategy. As per the Sustainability Roadmap Goals, Inditex has achieved all of the targets set for 2020. In particular, outperformance was seen in two main areas: Join Life and renewable energy. The Group has also set ambitious new targets for the year 2023.

•  A more responsive, adaptable and agile company.

FY2020 results: Marked by the pandemic

•  Despite the disruption caused by the lockdowns and restrictions, the strength of the business model is reflected in the high sales productivity. Trading hours were down 25.5% versus 2019. Total store and online sales in constant currency were down 24.5% versus 2019.

•  As at 31 January 2021, 30% of stores were in full lockdown (versus 8% on 31 October 2020) and 52% had restrictions.

•  Sales reached €20.4 billion.

•  Gross profit came to €11.4 billion, compared with €15.8 billion in FY2019. The gross margin reached 55.8% (-6 bps). The gross margin in constant currency in FY2020 increased +170 bps to 57.6% (+257 bps in 2H2020).

•  Strong operating performance in a disrupted trading environment. Operating expenses decreased 17%.

•  EBITDA €4.6 billion and net income €1.1 billion.

•  Inventory decreased 9% (excluding the 4Q2019 provision) and the net cash position was €7.6 billion.

Dividend

•  Inditex's dividend policy of 60% ordinary payout and bonus dividends remains in place. Inditex's Board of Directors will propose to the Annual General Meeting a dividend of €0.70 per share for FY2020. This will be composed of an ordinary dividend of €0.22 and a bonus dividend of €0.48 per share. This dividend will be made up of two equal payments to be made on 3 May 2021 and 2 November 2021.

•  The remainder of the bonus dividend (30 cents per share) will be paid in calendar year 2022.

Start of FY2021

•  Spring/Summer collections have been very well received by our customers.

•  In February, an average of 21% of stores were temporarily closed. At 8 March 15% of stores remained temporarily closed.

•  Store and online sales 1-7 March were -4% vs -4% in same period in 2020. Excluding the five most relevant markets in lockdown at the moment (Brazil, Germany, Greece, Portugal and UK) sales grew 2%.

•  According to current information, practically 100% of stores will be open by 12 April.

Performance in FY2020

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

Inditex's FY2020 performance has been materially impacted by Covid-19 with temporary store closures. Online sales have seen outstanding growth in FY2020, benefiting from the single inventory position.

As at 31 January 2021, 30% of stores were in full lockdown (versus 8% on 31 October 2020) and 52% had restrictions. The chart below illustrates the number of stores with sales over the period on a weekly basis.

Collections were very well received by our customers. Our supply chain continued to operate normally due to the flexibility of our business model based on proximity sourcing and the single inventory position. Inventory integration proved to be pivotal during this period. We have also implemented initiatives to adjust operating expenses. The flexibility of the business model has been key to the operational and financial performance.

The chart below shows the monthly sales performance in the period versus last year.

Inditex generated a strong operating performance. In FY2020, net sales reached €20.4 billion

(€28.3 billion in FY2019). Sales in constant currencies decreased 24.5%. The chart shows the full year and 2H2020 results:

€ million	FY2020	20/19	2H2020	20/19
Net sales	20,402	-28%	12,369	-20%
Gross profit	11,390	-28%	6,878	-19%
EBITDA	4,552	-40%	3,066	-26%
Net income	1,106	-70%	1,300	-38%

Despite the disruption caused by the lockdowns and restrictions, the strength of the business model is reflected in the high sales productivity. Trading hours were down 25.5% versus 2019. Total store and online sales in constant currency were down 24.5% versus 2019. The table below illustrates this performance.

2020

2H20

4Q20

Trading hours

Total store & online sales growth

(25.5%) (15%) (23.5%) (24.5%) (15%) (19.5%)

Global Online

Global online sales launches are on track. In 2020, Zara launched online in 25 markets.

Online sales came to €6.6 billion and grew 77% in constant currencies. 95% of online growth in the year was organic. Customer engagement remains very high. Active App's reached 132 million. Online visits in FY2020 have grown 50% to 5.3 billion visits. The Group has 200 million followers on social media.

The RFID and SINT programmes have now been fully rolled out in all concepts. SINT contributed €1.2bn to online sales in the year. This has allowed Inditex to transition into a company that is more responsive, adaptable, and agile.

Inditex Open Platform (IOP) is 80% implemented. This is expected to be fully rolled out by the end of FY2021.