Zara owner Inditex’s Americas profits surge as China slips

MADRID (Reuters) – Asia was an outlier for Zara owner Inditex last year, the only region where profits fell as China faced COVID-19 lockdowns, while profit ballooned in the Americas, the fashion retailer’s annual report showed on Thursday.

Inditex, the world’s biggest fashion retailer, reported record annual sales on Wednesday. It has been expanding in the United States and downsizing in China, which in 2019 was its second-biggest single market after Spain, delivering 8% of the group’s pre-tax profit.

Inditex’s “Asia and rest of world” region, which includes Australia, China, Japan, Kazakhstan and South Korea, saw profit fall by 4.3% in its 2022 financial year, which started on Feb. 1 last year, while profit in the Americas jumped 77%.

China was “very challenging” last year due to rolling COVID-19 lockdowns, CEO Oscar Maceiras told analysts on Wednesday, adding that he remains confident about opportunities there longer-term.

“Fashion demand, fashion appetite continues to be strong there, and it will remain a core market for Inditex,” Maceiras said.

The company made a pre-tax profit of 105 million euros ($111.31 million) in China in its 2022 financial year, which ended on Jan. 31 2023, down 47% from the previous year. China’s share of the total pre-tax profit fell to 2% from 4.7% the previous year.

The United States, which in 2018 contributed just 1.1% of Inditex’s pre-tax profit, accounted for 7.9% of pre-tax profit in 2022. The Americas as a whole brought in 1.1 billion euros of profit, 21% of the group total.

Spanish fashion retailer Mango, a privately-owned rival of Inditex, is also focusing on U.S. expansion after closing its last two stores in China last year, CEO Toni Ruiz said this week.

Inditex also cut its numbers of suppliers, factories, and workers in China last year while adding new suppliers in Bangladesh and Turkey. Major clothing companies globally have been moving production closer to stores in Europe and the United States.

Inditex’s five biggest markets by profit in 2022 were Spain, followed by the Netherlands, Switzerland, the U.S., Mexico, and the UK. Poland, Portugal, and Japan were among the handful of markets that saw profits fall.

($1 = 0.9433 euros)

(Reporting by Corina Pons, Additional reporting and writing by Helen Reid; Editing by Susan Fenton)