--Inditex plans to close stores as part of a new strategy that will more closely integrate its brick-and-mortar and online businesses
--The Zara owner swung to a first-quarter loss as the coronavirus pandemic hurt sales
--Inditex said sales trends started to improve in May with the easing of lockdowns
Industria de Diseno Textil SA, known as Inditex, said Wednesday that it swung to a first-quarter loss as the coronavirus dealt battered its sales, and that it will close at least 1,000 stores over this year and next in an effort to make its store network more efficient.
The Spanish fashion giant reported a net loss of 409 million euros ($462.5 million) for the quarter ended April 30 compared with net profit of EUR736 million the year prior and analysts' expectations of a EUR161 million net loss, according to FactSet.
Inditex said the loss was exacerbated by a EUR308 million provision for its store-optimization program. The company said it will complete this drive and "absorb between 1,000 and 1,200 stores in the years 2020 and 2021." It will focus on closing stores whose sales can be recaptured in nearby stores and online, it said.
The decision to close between 13% and 16% of its total store network is part of a 2020-22 strategy that Inditex outlined Wednesday along with its first-quarter results.
Its three areas of focus are digitalization, integration between stores and online, and sustainability, Inditex said.
"A higher quality network of better located stores in conjunction with online is expected to generate long-term annual like-for-like sales growth of 4%-6%," the company said.
The owner of Zara said its first-quarter sales fell to EUR3.3 billion from EUR5.93 billion the year prior, roughly meeting analysts' expectations of EUR3.35 billion, according to a FactSet consensus estimate.
The coronavirus pandemic hit Inditex hard during the quarter, with lockdowns forcing it to close the majority of its stores around the world. But the company said trends started to improve in May as most markets began to gradually reopen.
Store and online sales fell 51% in local currencies in May compared with a year earlier, Inditex said. For the June 2-8 period, store and online sales fell 34% in local currencies compared with a year earlier.
A little more than half of Inditex's stores around the world are now open, the company said.
Inditex set a goal of annual capital expenditure of about EUR900 million a year for 2020-22, and said it expects its online sales to represent more than a quarter of its total sales by 2022.
The company, which also owns Oysho, Massimo Dutti and Pull&Bear, declared separately on Wednesday a dividend of EUR0.35 for the fiscal year that ended Jan. 31. It had held out on declaring a dividend earlier this year due to the uncertainty around the pandemic. Inditex on Wednesday also pushed back the payment of the 2020 and 2021 bonus dividend of EUR1 it has promised shareholders to 2021 and 2022, respectively.
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