A shopper carries a bag from the Zara clothing store, part of the Spanish Inditex group, in Bilbao, Spain, November 30, 2021. REUTERS/Vincent West/Files

MADRID, March 16 (Reuters) – Sales at Zara owner Inditex jumped well above pre-COVID levels at the start of its new financial year, although the global fashion No.1 faces a challenge in the coming months after ceasing operations in Russia, an important market.

Inditex shares fell on March 5 after the company closed its 502 stores and halted online sales in Russia following its invasion of Ukraine and the imposition of Western sanctions. Russia and Ukraine accounted for 5% of its sales growth in February-March.

The Spanish group, whose brands also include Massimo Dutti and Pull&Bear, said on Wednesday that its in-store and online sales jumped 33% between February 1 and March 13 compared to the same period a year earlier, and were up 21% from pre-COVID levels in 2019.

Its net profit more than doubled in the fiscal year ended January 31, to 3.2 billion euros ($3.51 billion), as it recovered from the worst effects of the pandemic the year former. The results mirrored the recovery at rivals such as Sweden’s H&M (HMb.ST).

However, fourth-quarter sales were hit hard by temporary store closures in countries like Germany and China as the Omicron variant of the coronavirus spread. These restrictions caused quarterly sales to fall by around 400 million euros.

“Inditex’s results were weaker than consensus expectations, primarily due to Omicron effects in the second half of the fourth quarter. However, it got off to a strong start” in its new fiscal year, RBC analyst Richard Chamberlain wrote in a note to customers.

Shares of Inditex, which has 6,477 stores worldwide, rose 0.5% in early trading.

The group has weathered the pandemic in part by being able to produce more than half of its goods near Spain and deliver them quickly to consumers, while increasing the share of online sales to around a quarter of its revenue. global in 2021.

Next month, Marta Ortega, the daughter of the founder of Inditex Amancio, will take over the presidency of the group in the last stage of a generational transmission that began ten years ago.

Marta will replace veteran executive chairman Pablo Isla in April with new chief executive Oscar Garcia Maceiras, who was promoted in November, and a team of experienced managers.

The new team will face challenges amid inflationary pressures and uncertainties caused by the war in Ukraine.

“Demand for clothing has already been weak in Europe so far this year and any further weakness in the demand environment will make it even more difficult to pass through rising input costs into a deflationary industry,” the Credit said. Switzerland in a recent note to clients.

Inditex said the United States has become its biggest market in 2021, after Spain.

($1 = 0.9113 euros)

Reporting by Corina Pons Editing by Inti Landauro and Mark Potter

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