Today I would like to give you an insight into the Inditex ($ITX (-3,49%) ) Full Year 2024 Results presentation, which I attended virtually.
It was an informative event that gave us a detailed overview of the company's performance over the past year and the strategic plans for the future. The presentation was given by Oscar Garcia Maceiras (CEO) and Ignacio Fernández (CFO). Oscar Maceiras started with the good news for 2024. Inditex has achieved a very solid performance with sales growth of 7.5.
This is clear evidence of the strong demand for the collections throughout the year. This sales performance led to new highs in EBITDA and net profit. Net profit increased by 9% to 5.9 billion euros. The strong operating performance further strengthened the company's solid financial position, which is reflected in a significant free cash flow.
As a result of this strong performance, Oscar Maceiras announced a dividend dividend increase of 9% to EUR 1.68 per share for the 2024 financial year. financial year. The spring/summer collections have been well received by customers. The sales performance in the period from February 1 to March 10 (adjusted for the additional trading day in February) was 4% growth in constant currencies compared to the previous year. In the last trading week, growth even amounted to 7% in constant currencies. The integrated store and online model was the main driver of this strong performance.
Four key pillars are constantly driving Inditex's differentiation: the product offering, a unique customer experience, the focus on sustainability and the talent and commitment of its employees.
Oscar Maceiras emphasized that Inditex operates in 214 markets and has a small market share in a sector that remains highly fragmented, offering excellent opportunities for growth. Since the end of the 2022 financial year, sales have increased by 19%, with 4% fewer stores. The forecast for gross sales growth of 5% for the period 2024 to 2026 was confirmed. The logistics expansion plan for 2024 to 2025 is on track. Ordinary investments in 2025 are estimated at around EUR 1.8 billion and are to flow into the global store portfolio, the online platform and technology programs to improve integration.
Ignacio Fernández presented the financial details. He confirmed that sales, EBITDA and net profit have reached record levels . Turnover increased by 7.5 % to 38.6 billion euros, which corresponds to growth of 10.5 % in constant currencies. The gross profit increased by 7.6% to 22.3 billion euros, with a gross margin of 57.8%.. Operating costs were well managed and grew below the rate of sales growth. EBITDA increased by 8.9% to 10.7 billion euros and net profit by 9% to 5.9 billion euros. The Group continues to generate significant free cash flow, which has increased the net cash position to EUR 11.5 billion.
A stable gross margin of plus/minus 50 basis points is expected for 2025. Inventories at the end of the year were 12% higher than in the previous year, with current inventories up 6% year-on-year and described as high quality.
The global presence was strengthened by the opening new stores in 47 markets while achieving significant growth in both brick-and-mortar and online retail. All concepts delivered strong results, with the younger concepts exceeding expectations.
In the Q&A session that followed, analysts asked various questions. Richard Chamberlain from RBC asked about the development in the Americas region, where a slight slowdown was observed without currency effects, as well as the space plans and expansion in this region. Gorka García-Tapia replied that all regions showed positive growth in constant currencies and that the development in the Americas was influenced by negative currency effects in some markets such as Brazil and Mexico, which were partially offset by dollar sales. He emphasized the strategic importance of the USA and referred to numerous new store openings, expansions and relocations in 2024 as well as planned projects for 2025 and 2026.
Geoff Lowery from Redburn inquired about Zara's constant currency growth and Zara's share of the expected gross store expansion of around 5%. Gorka García-Tapia emphasized the planned gross space growth of 5% for 2025 and 2026 and the effects of the store optimization program, which has led to a significant increase in productivity. Sales per square meter (excluding online sales) increased by 28% between 2019 and 2024. In terms of concepts, growth in constant currencies was recorded in all regions and all concepts.
Georgina Johanan from JPMorgan addressed the recent slowdown in growth and asked about regional differences in consumer behavior and the reasons for the accelerated growth rate in the last week of trading. Oscar Maceiras explained that this period represents only a small part of the year at the start of the season and that the comparative figures for the last two years are high. The spring/summer collections were well received and growth had accelerated to plus 7% in the last week. He was confident about further developments and the robust business model.
Sreedhar Mahamkali from UBS asked whether the expected gross room growth rate of 5% should also be maintained in the medium and long term, especially after the availability of the new logistics capacities. Gorka García-Tapia confirmed the guidance of 5% gross room growth for 2025 and 2026 and pointed out that in the last two years, net room growth of around 2% was achieved with gross room growth of 5%.
William Woods from Bernstein asked about the margin strengths of the other concepts (Stradivarius, Bershka, Massimo Dutti) and whether the expansion of soft tag technology will further support this. Oscar Maceiras was very satisfied with the performance of all concepts, which would contribute to the diversification of the customer base and the product range. He referred to the expansion of the physical presence of these formats into new markets, such as the first Bershka store in India and the opening of Massimo Dutti in Miami.
James Grzinic from Jefferies asked whether sales growth in excess of operating cost growth was also a realistic assumption for the coming year. Gorka García-Tapia emphasized that this is an important focus and is in the company's DNA. He referred to variable personnel costs, efficiency gains through the use of technology (e.g. self-checkouts, soft tags) and operational leverage on rental costs through the renegotiation of rental contracts as factors that contribute to cost control.
Finally, questions were asked about the continued strong performance of the Spanish market despite Zara's already high market share. Oscar Maceiras saw this as an example of how the Group is also finding growth opportunities in more mature markets. Sales in Spain had increased by almost 10% in 2024, building on growth of 13% in 2023. The store optimization program would continue and new ways to improve the customer experience would be implemented. As an example, he cited the new stand-alone Zara Man store in Madrid and the planned "The Apartment" concept in an existing Zara store.
The conference painted a picture of a very healthy and fast-growing company. The solid financial results and the strategic initiatives to expand and increase efficiency indicate that Inditex is well positioned for continued success in the future.
