Despite 41% Profit Surge, Fashion Giant Zara's Owner Inditex Plans Price Hikes Amid High Inflation

Spanish multinational retail clothing chain Zara's owner and parent organisation Inditex has said this week that it plans to hike prices again this autumn. The fashion giant, which is one of the world's top clothes retailers, is trying to offset soaring costs as it worries demand will weaken due to the cost of living crisis.

Following the earlier price hikes in spring and summer, the company will raise prices again in the second half of the year, CFO Ignacio Fernandez said, despite Zara¡¯s parent Inditex reporting a 41% jump in profit for the six months to July and sales which rose by around a quarter.

"The level of newness, quality and design of our collections is driving our sales, but obviously we are always thinking about a stable pricing policy," Fernandez said, pointing to a further mid-single digit average price increase, as per Reuters report.

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In the first set of results since its founder's daughter, Marta Ortega, took over as new non-executive chairman, Inditex reported revenue of 14.84 billion euros ($14.82 billion), up from 11.9 billion euros a year earlier. Besides that, Zara owner made a net profit of 1.79 billion euros, up from 1.27 billion euros last year.

Inditex CEO Oscar Garcia Maceiras said sales were rising in the most recent weeks and he has strong confidence in the company's long term potential growth despite investors' concerns about weakening demand for fashion amid the rising cost of living, as per the report.

Highest Margin In Seven Years

The parent company of Zara also said that its gross margin reached 57.9% during the first half of the year, the highest in seven years.

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Reuters report mentioned that Inditex had decided to increase its prices early in the year to cope with inflation at a time when shoppers worldwide were buying more clothes for holidays, events and the return to the office after the lifting of COVID restrictions

As far as recent financial results are concerned, the annual growth rate of sales slowed for the company since the end of the first half to 11% in constant currency terms from Aug. 1 and Sept. 11, down from 15.9% in the second quarter.

Inditex has broadly maintained its strategy of producing at least half of its garments close to its headquarters in Spain, a policy which has benefited the company during the supply chain crisis.

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