The profit of Inditex, owner of Zara, increases by 30% to 5.4 billion euros in 2023 thanks to its commitment to high-end fashion and competitive prices

Zara owner Inditex said on Wednesday its net revenue for 2023 rose 30% to 5.4 billion euros ($5.9 billion), as the fast fashion giant bet on luxury shoppers and offered more competitive prices. than rivals like H&M.

The company's profits for the fiscal year that ended in January were in line with analysts' expectations in a survey by LSEG.

Inditex expanded its lead over H&M during 2023 thanks to its ability to deliver fashion trends more quickly from nearby suppliers and sell more clothing at higher prices to luxury shoppers. That has helped insulate it from the rapid growth of rival Shein, founded in China.

Sales in store and online grew by 10% and reached a record of 35.9 billion euros between February 2023 and January 2024.

Inditex's results were in line with analyst expectations provided by LSEG, but its sales are growing at a slower pace than the 17.5% increase reported last year, as the pace of price increases has slowed. moderate year after year.

Zara, its flagship brand, began raising prices ahead of H&M in response to rising inflation and as part of a shift to offer specialty pieces to a more high-fashion market, while the company's other brands grow their range. budget.

But in two years, Zara has increased the average prices of its assortment season after season less than H&M and other competitors, according to retail intelligence company EDITED.

The average price of clothing in stock at Zara for the Spring 2024 collection in the US market is 11% higher than two years ago, while stocks at H&M and Mango are up 20% compared to 2022, he said. Krista Corrigan, retail analyst at EDITED. .

Investors expect the company to continue outperforming archrival H&M. Its share price is trading at 21.8 times expected earnings for the next twelve months, while H&M's price-to-earnings ratio is 16.1.

“Inditex achieved the most difficult thing, which was to be able to grow while affecting inflation in 2023. It did so because it has a better value proposition than competitors like H&M,” said José Ramón Iturriaga, fund manager at Abante Advisors, which owns Inditex shares. . “I don't think this year is going to be more difficult for Inditex,” he added.