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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)
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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.

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Fashion

Tennis Attire is Everywhere. Credit the Pandemic, Social Media and Pickleball

Aryna Sabalenka, of Belarus, greets Emma Navarro, of the United States, at the net after winning their semifinal match of the US Open tennis championships, Thursday, Sept. 5, 2024, in New York. (AP Photo/Julia Nikhinson)
Aryna Sabalenka, of Belarus, greets Emma Navarro, of the United States, at the net after winning their semifinal match of the US Open tennis championships, Thursday, Sept. 5, 2024, in New York. (AP Photo/Julia Nikhinson)
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Tennis Attire is Everywhere. Credit the Pandemic, Social Media and Pickleball

Aryna Sabalenka, of Belarus, greets Emma Navarro, of the United States, at the net after winning their semifinal match of the US Open tennis championships, Thursday, Sept. 5, 2024, in New York. (AP Photo/Julia Nikhinson)
Aryna Sabalenka, of Belarus, greets Emma Navarro, of the United States, at the net after winning their semifinal match of the US Open tennis championships, Thursday, Sept. 5, 2024, in New York. (AP Photo/Julia Nikhinson)

While tennis fans savor the last matches of the US Open, a subset of spectators and TV viewers have watched the year's final Grand Slam tournament as a source of fashion inspiration they can use to serve looks off the court.
It may have escaped people who don't pay attention to clothing trends, but cities from Australia to America are awash in short pleated skirts, tennis dresses, polo collars and other garments that can make everyone look like they possess a country club membership and a respectable backhand, The Associated Press reported.
The styles naturally are on full display in the stands of Flushing Meadows. Students are sporting skorts - the skirt-short mashup often worn by tennis players - and crew socks as they return to college campuses. Young professionals and middle-aged parents are taking the posh and preppy aesthetic to cafes, parks and wherever they run errands.
“I’ve never played pickleball or tennis in my life, and I have like five tennis skirts,” Stacy Sierra, 19, said while walking on the University of Notre Dame campus in Indiana. Sierra said she likes the look of the skirts and preferred their flowy material to denim during the summer and early autumn.
The trend, dubbed “tenniscore,” owes its timing to multiple factors. It's an extension of athleisure, the time-saving, comfort-minded concept that made elevated yoga pants, spandex shorts and other recreational attire acceptable to wear in public, no workout required.
The popularity of pickleball - an easy-to-play mix of tennis, ping pong and badminton - as well as interest in timeless fashions that exude “polished comfort” help explain why clothing and shoe lines for inspired by racket sports are so ubiquitous this year, according to Kristen Classi-Zummo, an analyst with market research firm Circana.
The market research firm's data showed sales of women’s tennis apparel spiked 22% in the US between the beginning of the year and early August, while men’s tennis apparel saw a 19% increase. Athletic brands such as Nike, Fila and Adidas have rolled out fashion-forward collections of tank tops, shorts and visors to capture the momentum.
Fila, for its part, said in July that it was an ideal time for the company to “refresh its brand and product offerings” due to the rising popularity of sports like pickleball and tennis. One of its first cracks at the refreshed brand was a “Bellissimo” campaign, which the company described as a reimagination of the traditional country club as a "mix of sport and play."
Adidas created a different collection in honor of each of the four Grand Slam tournaments; shoppers can buy the cobalt blue and black dress Jessica Pegula wore during her quarter-final victory match over No. 1 Iga Swiatek on Wednesday for $130. Nike recruited fashion designer Yoon Ahn to create outfits for Naomi Osaka to wear while competing at the US Open and a retail tennis collection in colors meant “to evoke a rebellious, anarchistic teen aesthetic.”
Last week, Vogue magazine and the racket sports brand HEAD unveiled a tennis collection that the fashion magazine said took two years to create. Women's apparel brands like Free People and Abercrombie & Fitch also have gotten into the game along with luxury labels like Gucci, which has a partnership with No. 1-ranked men's singles player Jannik Sinner.
Circana first started seeing tennis and pickleball apparel – particularly athletic dresses - pop up in its data when consumers started venturing out more after the peak of the COVID-19 pandemic, Classi-Zummo said. People wanted to retain the ease of the loungewear they lived in during lockdowns but to look more polished and put together, she said.
Some fashion watchers categorize the trend as an offshoot of social media-fueled niche fads such as “ quiet luxury,” - which emphasizes high-quality materials and clean styles with no logos - and a close cousin known as an “old money aesthetic.” That's a term for styles viewed as displaying wealth - oftentimes generational - in a subdued way.
Others have credited “Challengers,” the movie starring Zendaya about a love triangle set in the world of competitive tennis, with reigniting interest in court clothes. (A generation ago, it was Gwyneth Paltrow's Izod dress in “The Royal Tenenbaums.”) Skorts have made a comeback with the help of celebrities like Taylor Swift, who was seen earlier this year wearing pleated beige and ruffled lavender ones, the latter while on a pickleball court.
Brands and retailers have taken notice as pickleball has soared from nearly nothing to 13.6 million US players in just a few years. (Padel, another tennis spinoff with roots in Mexico, also has gained traction, particularly in Europe.) Brands like Recess Pickleball and Tangerine Paddle offer clothing or accessories such as tote bags, and customizable paddles.
“We’re very lucky to have capitalized on a growing market, but I’m even shocked with sort of how fast it’s grown,” Tangerine Paddle co-founder Carly Llewellyn, whose company sells striped, flowery and other styles of custom-made paddles.

Health club operator Life Time and Lululemon signed an agreement allowing the active wear company to sell its apparel directly to club members and to collaborate on key pickleball events.
In April, Target rolled out a limited-time pickleball collection with the tennis brand Prince that included pleated skirts and other items that “delivered incredible sales momentum in all things pickleball,” Christina Hennington, the discount retailer's chief strategy and growth officer, said during a May earnings call.
Social media content creators, some of whom get paid to market products for brands or earn commissions from retailers like Amazon, have played a part in making tenniscore mainstream.