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The global fashion business journal

Nov 25, 20208:52am

Inditex formula to lose just €175 million in the Covid-19 quarter

While analysts consider the fast fashion model to be a risk for the future, proximity sourcing has saved Inditex in the first quarter. The group has reduced its cost of sales in proportion to the drop in sales.
Jun 11, 2020 — 9:00am
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Inditex formula to lose just 175 million in the Covid-19 quarter

 

 

Just 175 million euros. These have been the losses (excluding a €308 million provision) Inditex had between February and April, the worst quarter of the Covid-19 pandemic. While international rivals such as Gap losses have rocketed in the same period to more than 820 million euros with almost half of sales, the Spanish giant has managed to contain the red numbers. What is the secret of Inditex? Fast fashion is revealed as the key to Inditex’s ability to contain the impact of the coronavirus.    

 

Over the last few years, analists that have questioned the validity of the fast fashion model have been increasingly frequent. In 2018, Morgan Stanley published a devastating report that indicated an “inevitable long-term reduction” of Inditex, which was added two weeks ago by another from the same firm in a similar sense.    

 

However, the Inditex formula to avoid the impact of the coronavirus has been precisely the fast fashion and the flexibility in sourcing .As a result, in the first quarter of 2020, Inditex has reduced the cost of sales, that is, the cost of supply, by 42.8%, practically the same proportion as the group’s sales have decreased, by 44.3%.    

 

Between February and April, Inditex cost of sales stood at 1,374 million euros, compared to 2,402 million euros in the same period of 2019. The group’s sales stood at 3,303 million euros at end of period, compared to the 5,927 million euros in the first quarter of 2019, impacted by the forced closure of stores almost everywhere in the world to stop the Covid-19 pandemic.

 

While giants such as Primark had 2,100 million euros in stock in early June, Inditex has been able to reduce inventory by 10% at the end of the first quarter from the same period last year.

 

 

 

 

 

 

 

The elements of the formula 

 

If the Spanish group had kept the cost structure stable (including supplies) compared to the first quarter of 2019, the company would have lost 1,888 million euros, compared to the 409 million it finally noted (175 million discounting the impact of the provision) .    

 

In just over a month and a half (as Isla recognized yesterday, the changes were implemented from mid-March) Inditex has managed to cushion its losses by 1,713 million euros.    

 

More than a billion are related to cost of sales. Sourcing has become Inditex’s main weapon against the coronavirus, but not the only one, since the group has also reduced its operating expenses by 21.4%, with special emphasis from mid-March, when the impact of the coronavirus crisis was already clear.    

 

If the Spanish group had kept its operating expenses in line with those of the first quarter of 2019, it would have lost 394 million euros more. However, the company has managed to carry out adjustments for this amount in items such as central services, logistics or personnel expenses. Although in Spain the group has ruled out filing a ERTE (or expediente de regulación temporal de empleo, as the temporary layoff plan is called in Spanish) and has assumed personnel costs during the state of alarm, in other countries it has opted for the different mechanisms introduced by governments.


Rental expenses are included within depreciation and amortization. Although the company has not specified whether, like many other retailers, it has stopped paying its rents during the state of alarm, Isla admitted yesterday that it has renegotiated with its landlords.

 

Finally, another of the elements of the alchemy of Inditex in the first quarter are taxes on profits, that don’t appy since the company fell into the red.

 

 

Provisions

Inditex has opted in this quarter to anticipate the impact with a new provision. The company includes a €308 million provision for the completion of the store optimisation programme (which includes to absorb up to 1,200 stores until 2021).  

 

In the first quarter of the last fiscal year, Inditex provisioned 287 million euros for the foreseeable impact of the expansion of the pandemic on the inventory valuation of the spring-summer collection. Taking into account the evolution of the group in the first quarter and its ability to contain the stock, industry sources consider that Inditex could have oversized the impact.

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1 comments
samir sardana
25 Jul 2020 — 07:05
People are not understanding the COVID paradox


In the USA,the exposed cases are at least 20 times the number of the current detected cases,of 3.5 million,AND THE ACTUAL INFECTED CASES ARE AT LEAST,1O TIMES the current detected cases.


The current daily count in the USA is around 70000 and was around 25-30,000,a fortnught ago.These incremental 35000 were EXPOSED around 27 days ago (at the earliest) and were INFECTED ENOUGH,to take a TEST (after the symptoms came to light - 27 days,hence)


Therefore,it is safe to assume that for every 70000 cases today, there are at least 70000 more INFECTED, BUT NOT WITH SUFFICIENT SYMPTOMS TODAY,plus some more,WHO DO NOT WANT TO GET TESTED AT ALL.


Further,for every 1 COVID positive person WITH SYMPTOMS – it is safe to assume an EXPOSURE RATIO OF 10:1 IN A SPAN OF 30 DAYS – starting from the time when the COVID +ve person was 1st EXPOSED.We are ignoring the AYSMPTOMATICS - who CAN ALSO INFECT.


So for the 70000 cases today, there are AT LEAST 70000 more COVID positive persons (based on 1 day’s data),which makes it 140,000.These people have exposed,at least 1.4 million, in the last 30 days !


So,if you look at the number of cases in the USA, in the last 30 days,at 30000 a day,so you have a ROLLING stock of , 6 million EXPOSURES just in 30 days – who will show symptoms in the next 7-30 days,and so,the numbers will skyrocket.


Based on a population of 350 million – IT IS ONLY WHEN THE USA has 17-20 million DETECTED CASES – that the COVID saga will end.There WILL be NO CURE,AND NO VACCINE – just trial and error diagnostics.


So we are a long way away.dindooohindoo


30 days ago,the USA COVID cases were around 1.5 million and so the EXPOSURES were at 30 million.From that 30 million – in the last 30 days – the USA has had around 35000 cases per day,in the last 30 days – which is around 3% of the EXPOSURES,as of 30 days ago.


The Rolling stock as above,WILL DOUBLE IN A MINIMUM OF 30 DAYS, and the 3% will also DOUBLE, IN EVERY 60 DAYS, at the minimum.These are the coordinates of doom.


There is NO STATISTIC on 1 PARAMETER.How many COVID discharged humans in the USA were re-infected,and in what duration ? That is the ONLY HOPE – id.est., to be infected and survive.Can it REALLY BE ZERO ? Or does it show THAT releasing a COVID cured patient into the jungle – is the biggest disaster – a ticking neutron bomb ? These are the VULNERABLES - whose immunity and anti-bodies,CANNOT last very long. That is HOW the VIRUS was PLANNED.


USA numbers look devastating,as they have the infra,to test on that scale.The situation in other parts of the world, is BEYOND redemption.


Even in the USA,the sharp rise in Cases,is NOT DUE to the re-opening of businesses – BUT DUE TO LACK OF TESTING.It is the people who WERE NOT TESTED,in the last 30 days, AND HAD synptoms, in the interim – which is reflecting in the current data,of 70000 a day.


You can imagine the CATASTROPHIC DOOM,in Brazil and India – where THEY WILL NEVER be able to test,on the American scale.


In essence,the entire population of 7 billion,HAS TO BE infected,and at least 10%,will die due to COVID,and 10% more will die,due to other morbidities,which will have no medical attention and another 10%,will die due to starvation.


The persons who will die,are those,with a weak and infirm constitution,and low natural immunity – and whose body,is already damaged by medicines,steroids,nicotine, cocaine, adulterated food and alcohol.


A Perfect Constitution,is an essential,for a Perfect Brain


This is the Greek Formula,updated for AI + Robotics + Nanotech


The Greeks used to discard their defective samples,at BIRTH,on Mt Olmypus,for the ravens and vultures.That was he Priori Best Practice.2000 years since then, AI + Robotics + Nanotech, has made Humans obsolete.


Thence,comes in COVID – just like Pure Providence.After the 10+10+10% culling – we will get the NEXT virus – which will be in action,by November 2021.That virus will target,in Phase 1,the clowns CURED BY COVID – as the COVID bird has laid its nest in them.Then it will target those who were infected by COVID but did not show the symptoms.


Like a never ending Geometric Progression – towards redemption and salvation,like Zeno’s Paradox.

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