Zara owner Inditex sold its stores in Russia, the company's second biggest market

Madrid (AFP) - Zara owner Inditex, the world’s biggest fashion retailer, reported record profits for 2022 despite halting operations in Russia and soaring global inflation.

Net profit reached 4.1 billion euros ($4.4 billion) last year, a 27 percent jump from 2021, said Inditex, whose eight brands include younger fashion chain Pull&Bear and upmarket label Massimo Dutti.

In-store and online sales for the world’s biggest fast fashion retailer also hit a record, surging 17 percent to 32.6 billion euros.

“The excellent results of 2022 show the strength of our business model,” said Inditex chief executive Oscar Garcia Maceiras.

Inditex, like many other Western companies, closed shop in Russia last year following the invasion of Ukraine and sweeping Western sanctions against Moscow.

The group shut its 514 stores in Russia, its second biggest market after Spain.

The shops were sold to Emirati group Daher, which has business interests in retail and real estate, in October.

- Growth opportunities -

Inditex said strong sales in other markets such as the United States – now its second largest market – as well as online made up for its exit from the Russian market.

The company said it plans to undertake “at least” 30 new projects in the United States between 2023 and 2025 in cities such as Boston, Chicago, Los Angeles and New York.

The projects include enlargements of existing stores, opening new stores and relocations.

“We see significant long-term growth opportunities in the United States,” the company said.

Online sales hit 7.8 billion euros, a 4.0 percent rise over the previous record set in 2021.

The company said it plans to improve its online shopping experience by introducing tools such as a new size recommender and better search tools.

Inditex also overcame a surge in production costs that has hit manufacturers as inflation soared following Russia’s assault on Ukraine.

The company has set itself apart from some rivals such as H&M by passing on a larger chunk of rising costs to customers.

The company based in Spain’s northwestern Galicia region said it would boost investment in automation at logistics centres in Spain to increase efficiency.

- Salary increases -

Inditex in February agreed a 20 percent rise in average wages for shop workers in Spain to help compensate them for soaring inflation.

About a third of Inditex’s 165,000 are based in Spain. The vast majority of its staff work in its shops, and most are women.

Inditex’s results were largely in line with analysts’ expectations and the company said it expects further growth in 2023.

Sales between February 1 and March 13 were up 13.5 percent compared to the same period last year.

The Spanish group underwent a leadership shake-up last year, with Marta Ortega, daughter of multi-billionaire founder Amancio Ortega, taking over as chairwoman.

She and Maceiras have opted to stick to Amancio Ortega’s model “with small adaptations”, Alfred Vernis, a former senior figure at Inditex and now professor at the Esade business school, told AFP.

While this has proven profitable, he warned that Inditex’s progress towards green sustainability has been slow.

Inditex must “accelerate this transition much more” to avoid “little by little losing demand,” he said.