MADRID (Reuters) - Zara-owner Inditex (ITX.MC) said on Wednesday the coronavirus pandemic had dealt a significant blow to its business, with sales in the first two weeks of March plunging 24.1% and nearly half its stores temporarily closed around the world.
The cash-rich fashion group postponed its dividend payment and booked a provision of 287 million euros ($316 million) as the slump in demand while shoppers stay at home to avoid infection reduces the value of its spring/summer inventory.
Unlike many retailers struggling to adapt to changing shopping habits, the Massimo Dutti and Bershka owner has a pile of cash in its coffers. Net cash stood at 8.06 billion euros at the end of the year, the company said, up 20% on year.
Inditex is one of the biggest dividend payers amongst retailers, paying out 2.7 billion euros to shareholders last year. The decision on dividend policy this year will be made at a board meeting before the annual shareholder meeting in July.
In an attempt to get shoppers to splurge online, Inditex rival H&M this week offered 20% discounts and free delivery in some regions and 50% discounts at its upmarket label Arket on items such as wool blazers and linen boiler suits.
Inditex, which is not cutting prices, has temporarily shut all its stores in domestic market Spain where there has been a nationwide lockdown since Saturday. Bars, restaurants and shops selling non-essential items have shut.
Spain has been affected more by the coronavirus than any other European country except Italy and accounts for the fashion retailer’s largest network of stores by far. Inditex said it had temporarily closed 3,785 stores worldwide.
The world’s biggest clothing retailer reported annual net profit of 3.64 billion euros, up 6% from the year-ago period. The growth would have been 12% had it not been for the booked provision, the company said.
Shares in the Spanish chain have sunk since the coronavirus outbreak and are down by 34% since January to their lowest level in more than five years.
Shares fell as much as 4.5% on Wednesday before recovering slightly to trade at 20.9 euros at 11:46 GMT, far below its median analyst price target of 31 euros, according to Refinitiv.
The company said online sales were continuing and the group’s supply chain was functioning normally. All stores in China but 11 were now open, the company said.
China is an important market to Inditex which has more than 600 stores in the country. Chinese online sales continued to work throughout February, the company said, amidst the worst of that country’s outbreak.
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Reporting By Sonya Dowsett, Editing by Inti Landauro/Emelia Sithole-Matarise/Jane Merriman