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Zara owner Inditex writes down inventory and postpones dividend

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INDITEX SA said the coronavirus outbreak has forced the owner of the Zara and Massimo Dutti chains to shutter half its stores as the epicenter of the disease shifts from China to other key markets such as Spain and Italy.

Sales fell 24% so far this month in local currencies, the Spanish retailer said Wednesday. The company took a 287 million-euro ($316 million) provision for the as Covid-19 reduces the value of spring-summer inventory, and the retailer postponed the decision on a dividend until sometime before the annual shareholder meeting in July. The stock fell as much as 5%.

“Thanks to the company’s strong financial position and principles, we stand ready to respond in any way necessary,” Chairman Pablo Isla said in a statement.

The coronavirus outbreak has ravaged three of Inditex’s largest markets: China, Italy and Spain, all of which have imposed stringent lock-downs. Inditex said 3,785 stores are temporarily closed in 39 markets. After widespread shutdowns, all but 11 of its Chinese stores have resumed operations.

Inditex also has an unusual exposure to the outbreak given its sourcing countries. While the company is far less dependent than rivals on Chinese production, its main manufacturing market is Spain, where the government declared a state of emergency March 14. The company said its supply chain is still operating normally, helped by Inditex’s focus on flexible purchasing.

Inditex said it’s too early to quantify the impact of the pandemic on its full-year results, though said its underlying like-for-like sales growth rate remains 4% to 6%.

The stock lost a third of its value in the past month and is trading near a seven-year low. — Bloomberg





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