INDITEX : Transcript English , PDF, 0.17MB

INDITEX

INTERIM THREE MONTHS 2022

CONFERENCE CALL SCRIPT

8 June 2022

Important notice: Although we try to accurately reflect the speech delivered, the actual speech that1 was delivered may deviate from this transcript.

INDITEX PARTICIPANTS

Óscar García Maceiras - CEO Ignacio Fernández - CFO

Marcos López - Capital Markets Director

C o n f e r e n c e C a l l P a r t i c i p a n t s

Richard Chamberlain, RBC - Analyst

Anne Critchlow, Société General - Analyst

Rebeca McClellan, Santander - Analyst

Warwick Okines, Exane BNP Paribas - Analyst

Nick Coultier, Barclays - Analyst

James Grzinic, Jeffries - Analyst

Important notice: Although we try to accurately reflect the speech delivered, the actual speech that2 was delivered may deviate from this transcript.

Introduction: Marcos López - Capital Markets Director

Buenos días a todos, Good Morning everybody. A warm welcome to all of those attending this presentation of Inditex's Results for the interim three months 2022. I am Marcos López, Capital Markets Director.

The presentation will be chaired by Inditex's CEO Oscar García Maceiras. Also with us is our CFO Ignacio Fernández.

As usual, the presentation will be followed by a Q&A session starting with the questions received on the telephone and then those received through the webcast platform. Before we start, we will take the disclaimer as read.

And now over to Oscar.

Slide 4: CEO

Slide 5: 2021: Strong operating performance

Slide 6: 1Q2022: Strong operating performance

Good morning to everybody and welcome to Inditex's results presentation.

In the first quarter of 2022, our fully integrated model has accelerated its differentiation. Let me cover some of the details.

We have had a very strong operating performance as the initial Spring/Summer collections were very well received by our customers. This performance has been strong across all geographies, with the exception being those markets subject to restrictions. The robust growth in the US market continues to take place.

The period has been marked by a significant rebound in traffic to stores. Over the first quarter 2022, our store sales increased markedly and to date, continue to do so, with store differentiation being key to this.

The execution of the business model was very strong. Our operating performance places us in a robust financial position. We have generated significant free cash flow, which takes our net cash position to 9.2 billion euros. Based on the expansion of our fully integrated platform we continue to see lower capital intensity going into the future.

All this in conjunction with a predictable, attractive dividend policy.

Our diversified presence in 215 markets with low market penetration allows us to enjoy significant global growth opportunities. We have complete confidence in our unique business model.

Slide 7: 1Q2022: Strong operating performance

Let me highlight some key figures for the year thus far.

Sales reached 6.7 billion euros, 36% higher versus the first quarter of 2021. As mentioned, traffic to our stores increased markedly.

To put the strength of the operating performance over the first quarter into context, we have generated the strongest gross margin in many years.

Important notice: Although we try to accurately reflect the speech delivered, the actual speech that3 was delivered may deviate from this transcript.

We have made the decision to provision all expected expenses corresponding to the Russian Federation and Ukraine for 2022 with an extraordinary charge of 216 million euros.

Operating expenses were tightly managed and grew well below sales growth.

On the bottom line, net income increased 80% to 760 million euros. The net income excluding the provision would have been 940 million euros.

Our operations continue to generate strong cashflows.

I would like to comment on some initiatives of this season which are driving the increasing levels of commercial differentiation we are seeing.

Slide 8: Zara Woman Studio

We continue providing the latest fashion in a fully integrated way. A good example of this is the seamless store and online execution that can be seen in the Zara Studio Collection.

Slide 9: Zara Man Studio

Or, the Zara Man Studio collection

Slide 10: Zara Kids Summer Camp

The Zara Kids Summer Camp collection

Slide 11: Zara Home I'm awake, a collection for newborns

Zara Home I'm awake, a collection for newborns

Slide 12: Massimo Dutti's Limited Edition

Massimo Dutti's Limited Edition

Slide 13: Bershka Festival Season

Bershka's Festival Season

Slide 14: Pull&Bear Dresses Editorial

The Pull&Bear's Dresses Editorial.

Slide 15: Stradivarius Ø waste denim

Stradivarius Zero Waste Denim collection, made 100% from recycled fibres.

Slide 16: Oysho On the beach collections

…and finally, Oysho's on the beach collections.

Slide 17: Zara Madrid's Plaza de España (Video)

I would like to highlight a key project of this season: The Zara store in Madrid's Plaza de España.

Important notice: Although we try to accurately reflect the speech delivered, the actual speech that4 was delivered may deviate from this transcript.

The store is the largest Zara in the world showcasing the latest fashion with the most up-to-date image.

It also includes all the features of our Digital store mode, allowing a complete digital experience.

For example, customers can utilise applications to geolocate products

…to reserve fitting rooms…

…to use self-check-out through Pay&Go…

…to employ click and collect points for online orders…

…to use silos for online returns to the store…

…and finally, customers are able to use clothing recycling points, helping us to push forward in terms of circularity.

All these factors combine to offer customers one of the most advanced store experiences anywhere today and serves to further demonstrate the clear advantages of our fully integrated approach.

I'll hand you over to Ignacio now for the Financial Summary.

Slide 18: CFO

Slide 19: Financial Summary

Thank you Oscar.

Slide 20: 1Q2022: Very strong operating performance

As you have seen in our release, Inditex had a very strong operating performance in the first quarter of 2022. We have executed well in what has been a challenging operating environment.

We have managed the supply chain very actively, and this has driven a healthy performance in the gross margin. Operating expenses have of course been tightly managed.

As already mentioned, we have taken an extraordinary charge of 216 million euros in order to provision all expected expenses in the Russian Federation and Ukraine for 2022.

Net income increased 80% to 760 million euros. Excluding the provision, the net income would have been 940 million euros.

Slide 21: Sales

Sales have progressed very nicely at plus 36% reaching 6.7 billion euros.

It is important to note the strong rebound in traffic to Inditex's stores during the quarter, which continues to date.

As we've already commented, we have had a very strong performance across all regions, with the exception of those markets subject to restrictions.

The strong progress made in the United States continues.

Important notice: Although we try to accurately reflect the speech delivered, the actual speech that5 was delivered may deviate from this transcript.