Zara Owner Inditex’s First-Half Sales Surge Ahead of Potential Slowdown

Zara's logo is displayed on a window, at one of the company's largest stores in the world, in Madrid, Spain, April 7, 2022. (Reuters)
Zara's logo is displayed on a window, at one of the company's largest stores in the world, in Madrid, Spain, April 7, 2022. (Reuters)
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Zara Owner Inditex’s First-Half Sales Surge Ahead of Potential Slowdown

Zara's logo is displayed on a window, at one of the company's largest stores in the world, in Madrid, Spain, April 7, 2022. (Reuters)
Zara's logo is displayed on a window, at one of the company's largest stores in the world, in Madrid, Spain, April 7, 2022. (Reuters)

Fashion brand Zara's owner Inditex said on Wednesday that profit for the six months to July jumped by 41% and sales rose by around a quarter, putting it on a strong footing ahead of second half likely to see rampant inflation hitting demand for clothing.

In the first set of results since its founder's daughter, Marta Ortega, took over as new non-executive chairman, the company said revenue for the period rose to 14.84 billion euros ($14.82 billion) from 11.9 billion euros a year earlier. It booked a net profit of 1.79 billion euros from 1.27 billion euros last year.

CEO Oscar Garcia Maceiras said sales were rising in the most recent weeks. However, the annual growth rate slowed slightly since the end of the first half to 11% in constant currency terms from Aug. 1 and Sept. 11.

The results were in line with analyst forecasts, which flag that autumn and winter will likely be challenging as the soaring cost of living weakens demand for fashion and leaves shoppers less keen to buy clothing at higher prices.

Inditex had decided to increase its prices early in the year to cope with inflation at a time when shoppers worldwide were buying more clothes for holidays, events and the return to the office after the lifting of COVID restrictions.

"Inditex has delivered a very strong absolute and relative performance," Deutsche Bank analyst Adam Cochrane said.

"But the lower consumer confidence is likely to see clothing sales decline in the second half of the year and into 2023 although price increases in the cost of clothing will help revenues", he added.

Inditex has broadly maintained its strategy of producing at least half of its garments close to its headquarters in Spain and the higher proportion of proximity sourcing benefited the company during the supply chain crisis.

Analysts are expecting negative earnings momentum and weaker sales for Inditex's biggest rival, Sweden's H&M, and consider the Spanish retailer better placed than competitors to face the challenges.

Inditex said its gross margin reached 57.9% during the first half of the year, the highest in seven years. The company added that has temporarily sped up its inventory to avoid supply chain snags. As of Sept. 11, inventory levels were 33% higher than a year earlier.



Zalando Uses AI to Speed Up Marketing Campaigns, Cut Costs

FILE PHOTO: A person with a shopping bag of Zalando outlet walks along Kurfuerstendamm shopping street looking for bargains in Berlin, Germany, December 3, 2022. REUTERS/Lisi Niesner/File Photo
FILE PHOTO: A person with a shopping bag of Zalando outlet walks along Kurfuerstendamm shopping street looking for bargains in Berlin, Germany, December 3, 2022. REUTERS/Lisi Niesner/File Photo
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Zalando Uses AI to Speed Up Marketing Campaigns, Cut Costs

FILE PHOTO: A person with a shopping bag of Zalando outlet walks along Kurfuerstendamm shopping street looking for bargains in Berlin, Germany, December 3, 2022. REUTERS/Lisi Niesner/File Photo
FILE PHOTO: A person with a shopping bag of Zalando outlet walks along Kurfuerstendamm shopping street looking for bargains in Berlin, Germany, December 3, 2022. REUTERS/Lisi Niesner/File Photo

European online fashion retailer Zalando is using generative artificial intelligence to produce imagery faster for its app and website, it said on Wednesday, as AI shakes up the fashion industry and cuts costs.
Zalando, which sells branded clothes, shoes, and accessories across 25 markets in Europe, is using AI to produce imagery quickly enough to respond to short-lived fashion trends spread on social media. It is also developing AI-generated "digital twins" of models to use in its marketing.
"We are using AI to be able to be reactive," Matthias Haase, vice president of content solutions at Zalando, told Reuters in an interview.
Using generative AI cuts the time needed to produce imagery to around three to four days from six to eight weeks, and reduces costs by 90%, Haase said, adding the AI-generated content drives greater engagement from customers.
"It's not because of AI content that is better than human-created content, it is really about how new, how relevant it is to our customers," Haase added.
Around 70% of Zalando's editorial campaign images were AI-generated in the fourth quarter of last year as it has increased use of the technology. AI-generated images illustrated Zalando's recap of the year's biggest trends, including "brat summer", "mob wife", and double denim.
For an industry used to costly, meticulously planned fashion shoots on sets or in far-flung locations, the prospect of using AI to speed up production and use marketing money more efficiently is of particular appeal to retailers with far smaller budgets than the big, luxury players.
Zalando is the latest retailer to try out AI-generated digital twins of models, after Sweden's H&M in March said it created digital twins in collaboration with a modelling agency.
The AI-generated three-dimensional replicas enable Zalando to feature a model in a campaign and show an exact replica of that model in the app's product pages, without needing to take hundreds of photos.
Asked how generative AI could affect job prospects for fashion photographers, Haase said traditional fashion shoots will still be needed, but that photographers and other creatives will also have to adapt to using AI tools.
"Creative people fear that AI makes creatives redundant," Haase said. "I don't see that at all, to be honest... I see it rather that creative minds have now, instead of two hands, six hands."