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Inditex Profit Soars as Zara Owner Raises Prices

Inditex, the world’s largest fashion retailer and owner of the popular brand Zara, has reported a 24% jump in their net profit over the first nine months of their fiscal year.

This boost in profits came as a result of their efforts to raise prices to offset weakening global demand for clothing.

The company’s sales, both in-store and online, increased by 19% from last year. This increase was faster than what many analysts had predicted, and their price rises of 5% or more were largely responsible for helping sustain business growth.

Since April, when daughter of founder-owner Amancio Ortega Marta Ortega took up the role of non-executive chair, Inditex has gone from strength to strength. With their flexible sourcing methods allowing them to quickly provide the latest designs to customers, they have been particularly successful at appealing to the luxury segment of the market.

However, during the third quarter sales only increased by 11%, a slower pace than in preceding months. This is likely due to the falling purchasing power of shoppers and the current weakening consumer environment. Their second-quarter sales, on the other hand, had risen 16%.

Between the start of November and December 8th, sales rose by 12%, positive in all geographic areas according to Inditex.

Analysts suspect that the company will have to face rising costs in the future, with workers already beginning to push for improved wages. During Black Friday in La Coruna, the company’s home town in Northern Spain, around 1,000 shop assistants went on strike to demand better salaries, and protests were also staged in Madrid the day before.

Deutsche Bank analyst Adam Cocharne commented “The strikes that have been reported in Spain in Inditex stores suggest there is further upward pressure on wage inflation”.

Despite these disputing workers refusing Inditex’s proposed salary increase until 2024, two major local unions eventually agreed to the proposal.

Europe’s largest retailer, Inditex’s main rival H&M, recently announced drastic steps to combat surging costs related to the war in Ukraine. H&M are now the first big European company to begin laying off staff this month.

With their innovative strategies, Inditex has managed to rise above the obstacles faced in the current climate and prove that staying ahead of the curve is possible. It remains to be seen if their success will continue in the face of rising prices, worldwide economic decline and worker protests.