Inditex Industria de Diseño Textil : Pablo Isla highlights the integrated store and online model as the “strategic cornerstone” of Inditex's sustained growth

• The Group's chairman and CEO thanked the 'commitment of all the people that are part of Inditex' and highlighted 'diversity, equal opportunities and career development as the features that define Inditex's relationship with its people'
• Isla reviewed Inditex's performance in 2017 at today's Annual General Meeting
• Pablo Isla reiterated how the company's investments are driving 'consistent creation of economic, social and environmental value'
• Inditex announced expansion of its Closing the Loop programme and the start of its at-home used-clothing collection service in Beijing and Shanghai in September
• The Group's earnings performance has enabled Inditex to pay a dividend of €0.75 per share, up 10.3% year-on-year, meaning the dividend per share has increased by 70% during the last five years

At the Annual General Meeting held today at its headquarters in Arteixo, Inditex's shareholders approved the Group's performance in 2017, a year in which store numbers surpassed 7,400 in 96 markets and online reached 47 markets. Group revenue totalled €25.34 billion, underpinned by growth in all the regions in which Inditex does business, as well as growth in online sales, which accounted for 10% of the total. Net profit totalled €3.37 billion. These results have paved the way for the payment of a dividend of €0.75 per share, marking growth of 10.3% year-on-year and of 70% in the last five years.

During his presentation to the company's shareholders, Inditex chairman and CEO Pablo Isla highlighted the company's integrated stores and online model which has enabled 'sustained growth over the years, coupled with consistent creation of economic, social and environmental value'.

The chief executive also highlighted the fact that the 7.4% growth in the Group's retail space in 2017 kept pace with the continued upgrade and refurbishment of the entire store network. The Group ended the year with 7,475 stores in the best shopping streets and centres in 96 markets, seven of its brands having entered the Belarus market during the year.

'A solid growth model'

This store refurbishment drive has been accompanied by considerable growth in the online platform of the group's largest brand Zara, www.zara.com having gone live in India, Thailand, Malaysia, Vietnam and Singapore in 2017 and in Australia and New Zealand in 2018. 'All of Inditex's brands benefit from a robust integrated store and online platform. In 2017, online sales already accounted for 12% of the total in the 47 markets in which e-commerce platforms are available, representing annual growth of 41%', Isla said.

He also noted how the very nature of the integrated model, coupled with constant investment, is paving the way for innovations that are '100% customer focused'. Specifically these include the same-day delivery service in seven cities (Madrid, London, Paris, Istanbul, Shanghai, Taipei and Sydney); the next-day delivery option, available in Spain, France, the UK, China, Poland and South Korea; the new automated in-store pick-up points for orders placed online; and plans for the integrated management of stock in all 48 of the markets in which Zara has an online presence by the end of 2018.

The work done to further the integration of stores and online, which is evident in the introduction of next-generation, customer-oriented technology and services, set the backdrop for Mr. Isla's explanation of the Group's model. This model has yielded cumulative topline and same-store sales growth of 59% and 36% respectively during the last five years, with all regions delivering positive results.

Inditex's chief executive also underlined the Group's continued commitment to investment, highlighting capex of €1.8 billion in 2017 to put the total at 'over €7.7 billion during the last five years'. Of this total, 'more than €1.5 billion has been earmarked to technology and logistics upgrades' over the same timeframe.

On the innovation front, he highlighted the deployment of RFID technology, already complete at Zara and currently in progress at Massimo Dutti and Uterqüe. The plan is to deploy this technology across the rest of the Group's brands in 2018 with full rollout scheduled for 2020.

He also talked about the new centre in A Laracha (A Coruña) which is due to start to operation this summer with close to 90,000m2 of floorspace.

Mr Isla also noted how Inditex's various distribution centres had continued to embrace new technology, including the widespread introduction of high-speed multi-shuttles which are now able to sort even cosmetics items, and the implementation of six new robot palletisers which are enhancing delivery times.

In parallel, he said that work continues on construction of the distribution hub in Lelystad in the Netherlands, which will complement Inditex's 10 platforms centralised in Spain.

Closing the Loop: over 25,000 tonnes of garments recovered in 21 markets

Mr. Isla also gave an account at the Annual General Meeting of the Group's Closing the Loop programme for the reuse and recycling of textile products. The programme's footprint was extended to 21 markets so far. The 961 containers installed in its stores are complemented by over 1,800 street containers set up throughout Spain in collaboration with Caritas and the at-home pick up service which operates nationwide in Spain.

This initiative, one of the cornerstones of the Group's strategic commitment to the circular economy, enabled the collection of over 25,000 tonnes of garments since it was first launched in 2016. The plan is to continue to gradually roll the programme out in additional markets.

As the next step, the company will begin to pilot test the at-home pick up service in China, specifically in the cities of Beijing and Shanghai, in September.

He said that this commitment was similarly evident in the use of select raw materials and recycled textiles for Zara and Massimo Dutti's Join Life and Oysho's WeAre the Change collections. In 2017, more than 73.6 million garments adopted these labels for the use of the most sustainable raw materials and processes.

Pablo Isla also referred to the progress made in the research being coordinated by the MIT International Science and Technology Initiatives (MISTI), part of the Massachusetts Institute of Technology (MIT), which is focused on improving the recycling of used textiles and creating new fibres using clean technology. Thanks to the MIT Spain-Inditex Fund, the universities of Vigo, the Basque region and Granada and the Polytechnic School of Valencia have unveiled pioneering projects for the separation and subsequent recycling of fibres.

Also on the sustainability front, Mr. Isla reported that 80% of the Group's stores already meet its eco-efficiency criteria, delivering average savings in water and energy consumption of 50% and 20% respectively compared to conventional stores.

Multiple cultures, creative talent and equal opportunities

At the end of the year, Inditex had over 171,000 employees worldwide of 97 different nationalities. It is a team characterised by 'creative talent, self-imposed high standards, the ability to work as a team and a strong customer focus' in the words of Pablo Isla. The chairman and CEO thanked the 'commitment of all the people that are part of Inditex' and highlighted that 'Inditex's relationship with our people is defined by diversity, equal opportunities and career development'.

In glancing back at the year's key figures, Pablo Isla noted that the positive trend in the creation of stable and quality jobs had continued last year. In the past year, the Group created 9,596 jobs, 2,480 of them in Spain. As a result, Inditex has generated nearly 53,000 jobs worldwide in the past five years, 10,000 of them in Spain.

Inditex paid its employees over €562 million from its 2017 profits in addition to their base salaries. Of this total, €520 million was paid in bonuses and commissions. A further €42 million relates to phase one of Inditex's extraordinary profit-sharing plan which was paid out last April to the approximately 88,000 employees who had been working for the Group for at least two years as of 31 March 2018.

Finally, Pablo Isla described how the Group creates value for the communities in which it does business, quantifying Inditex's global tax contribution in 2017 at €5.96 billion. Of this sum, €1.61 billion was paid in Spain, where the Group is headquartered. €1.01 billion of this amount was in the form of direct taxes.

He also referred to the more than 1.5 million direct beneficiaries of the 594 community programmes in which Inditex invested €48 million in 2017, and outlined the main humanitarian aid, community well-being and educational programmes and projects which were supported by Inditex's contributions in the past year.

In addition to the 2017 financial statements, Inditex's shareholders voted in favour of the appointment of Pilar López, president of Microsoft Spain, as a new independent director, and of the re-election of Rodrigo Echenique, who is also an independent member of the Board of Directors. They also ratified the motion to pay a total dividend of €0.75 per share, €0.375 of which was already distributed on 2 May, leaving the remaining €0.375 to be paid in the form of an ordinary final dividend and special dividend on 2 November 2018.