Inditex(US:IDEXY)2022-03-16 18:35Financial Data and Key Metrics Changes - In 2021, sales in constant currency were 3% higher than pre-COVID 2019 levels, with net income reaching €3.2 billion, up 193% compared to 2020 [8][9][20] - The gross margin reached 57.1%, the highest in six years, with a stable outlook for 2022 expected to be within ±50 basis points [20][42] - Free cash flow accelerated, with net cash at €9.4 billion at year-end, and cash from operations was €5.1 billion [10][24][106] Business Line Data and Key Metrics Changes - Online sales grew 14% compared to 2020, reaching €7.5 billion, accounting for 25.5% of group sales [8][10] - Store sales improved significantly, with a 36% recovery over 2020, and the store optimization program was deemed a success [13][28] - All business concepts achieved profit before tax as a percentage of sales exceeding 15% in 2021 [27] Market Data and Key Metrics Changes - The United States became the largest single market for Inditex after Spain, reflecting strong sales performance [20][93] - Sales performance in 2021 was impacted by COVID-19 restrictions, particularly in the fourth quarter due to the Omicron variant [15][17] - Sales from the Russian Federation and Ukraine contributed approximately 5 percentage points to sales growth in early 2022 [16][62] Company Strategy and Development Direction - Inditex is focused on a fully integrated digital and sustainable business model, emphasizing the importance of online and store integration [5][40] - The company aims to increase the differentiation of its business model to enhance customer experience, with sustainability and digitalization at the core of its strategy [42][43] - Capital expenditure for 2022 is projected at €1.1 billion to drive differentiation, digitalization, and sustainability [45] Management Comments on Operating Environment and Future Outlook - Management expressed confidence in the business model's resilience, noting a strong start to 2022 with sales significantly above 2021 and pre-COVID levels [47][98] - The company remains committed to a predictable and attractive dividend policy, proposing a dividend of €0.93 per share, a 33% increase from 2021 [7][46] - Management acknowledged the challenges posed by the Omicron variant but indicated a return to positive sales patterns as restrictions eased [16][19] Other Important Information - Inditex has made significant progress in sustainability, with 91% of its facilities using renewable energy and 42% of fibers used being more sustainable [32][36] - The company is working with over 145 start-up companies to drive innovation in sustainability [35] Q&A Session Summary Question: Gross margin guidance and cost inflation impact - Management expects gross margin to remain broadly stable, with mid-single-digit price increases planned to offset cost inflation [54][57] Question: Impact of Russia store closures on EBIT - Management indicated that the impact of store closures in Russia would not be material, with a focus on supporting staff [62][88] Question: Confidence in passing through price increases - Management stated that the mid-single-digit price increases have been implemented without negatively impacting sales volume [65][71] Question: Online sales decline in Q4 - Management explained that the decline was due to a high comparative base from the previous year and additional costs from online operations during Omicron [73][74] Question: Update on China and supply chain constraints - Management preferred not to comment on short-term impacts but noted strong trading updates overall [93][98]