Annual Results 2020 FY20 Results A year dominated by the pandemic and key to the transformation of the company exceeds € 1.1 billion net profit

Online sales increased by 77% in local currencies to €6.6bn, making Inditex a global leader in online

Zara

2 10 march 2021

The Group generated net sales of €20.4 billion in FY20 – from 1 February 2020 to 31 January 2021 – reducing the year-on-year decline to 28% or 25% excluding the foreign exchange impact. This was despite 100% of its stores being mandated to close or having restricted trading hours or capacity during periods of the financial year.

Inditex’s executive chairman, Pablo Isla, said of the results, “Inditex has emerged stronger after such a challenging year thanks to the amazing commitment displayed by everyone here at the company”. Under this context, he underlined the relevance of “the digital transformation strategy initiated in 2012, which is built around the integrated store and online sales platform”. “Inditex as a company is stronger today than it was two years ago, with a unique business model and a global, flexible, digitally integrated and sustainable sales platform, which places us in an excellent position for the future”., Isla concluded

During the year, Inditex launched its online sales platform in 25 new markets and opened new stores in 29. The Group’s eight brands are currently available online in 216 markets around the world, 91 of which offer the integrated store and online shopping experience.

The fast deployment of the integrated stock management system (SINT), which is already available in 5,777 stores across 89 markets, has played a crucial role during the pandemic. Specifically, SINT made it possible to fulfil 46 million online orders worth €1.16 billion from the Group’s stores during the year.

In a year dominated by the pandemic, Inditex continued generating cash to reach €7.6 billion net financial position by close of FY20.

Store and online sales in local currencies decreased by 15% between 1st and 28th February 2021, with 21% of stores closed. Between 1st and 7th March, with 15% of stores closed, sales decreased 4%. Excluding the five more significant markets with mandated closures (, , , and UK) sales registered growth of 2%.

Thanks to the robust net financial position, the Board of Directors will submit a motion for the payment of a €0.70 per share dividend at the next Annual General Meeting: an ordinary dividend of €0.22 and an extraordinary dividend of €0.48. €0.35 will be paid out on 3 May 2021 and the remaining €0.35 on 2 November 2021.

3 Inditex employees

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I. A year dominated by the pandemic

Inditex generated net sales of €20.4bn in FY20 (1 The Group’s tax contribution was €4.7bn, while its February 2020 to 31 January 2021), a year dominated effective global income tax rate was 21.2%, in line by the COVID-19 pandemic. The company prioritised with previous years. the health of its staff and customers at all times, and every one of its stores was mandated to close As a result, the Group was able to reach a net profit of or restrict trading hours and capacity during long €1.1bn in FY20. In this sense, the company reached periods of the year. a remarkable €1.3bn net profit during the second half of the fiscal year. Against that backdrop, online sales registered growth of 77% in local currencies, to over €6.6bn in FY20, In light of these results, Inditex’s executive chairman, with growth of over 100% during certain periods of Pablo Isla, said, “Inditex has emerged now a stronger the year. Those figures rank Inditex as one of the company, after such a difficult challenging year, leading players in online fashion globally. thanks to the amazing commitment displayed by everyone here at the company.” He added that “the Active and continuous cost management throughout digital transformation initiated in 2012, which is built the pandemic drove a reduction in operating around the integrated store and online sales platform, expenses of 17%, evidencing the company’s flexibility has proven to be the right strategy”. “Inditex as a and ability to adapt. In parallel, gross margin stayed company is stronger today than it was two years ago, at a robust 55.8%, despite the restrictions faced with a unique business model and a global, flexible, across the store network, particularly during the digitally integrated and efficient sales platform, fourth quarter, which has the biggest impact on this which places us in an excellent position for the future”. metric every year. In local currencies, gross margin growth increased 170bps to 57.6% of sales (257bps in the second half). 2021 trading update. Store and online sales in local currencies declined by 15% between 1 and 28 The Group ended the year with a solid liquidity February, with 21% of the stores closed. Between 1 and position of €7.56bn and high-quality inventory, thanks 7 March, with 15% of stores closed, sales contracted to continuous improvement in stock management. by 4%. Excluding the five more significant markets with Inventory decreased by 9% following the impairment mandated closures (Germany, Brazil, Greece, Portugal in value provision recognised in 2019 in anticipation and UK) sales registered growth of 2%. of the effects of the pandemic. Thanks to the robust net financial position and cash The integrated management of online and store flows generated by the strong operating performance, inventories was one of the highlights of the year: the Company was able to pay dividends worth thanks to the rapid deployment of the Integrated €1.1bn last November, while maintaining its ability to Stock Management System (SINT) – already reinvest in the growth of the company. In this same available in 5,777 stores across 89 markets – the line, Inditex’s Board of Directors will submit a motion Group was able to fulfil online orders worth over for a €0.70 per-share dividend at the Annual General €1.16bn from its stores. Meeting scheduled for July. The proposed payment

5 Orders prepared from store through SINT

will consist of an ordinary dividend of €0.22 and an orders and endorsing financial support initiatives extraordinary dividend of €0.48 per share, divided into (refer to page. 8-9). two equal payments, €0.35 per share to be paid on 3 May 2021 and another €0.35, on 2 November 2021. Specifically in , the number of local suppliers increased to 6,384 and they invoiced the Group more than €4bn. Total invoicing by Spanish suppliers over A committed company. Throughout the pandemic, the past five years stands at €24.4bn. the Group has reinforced its commitment to its various stakeholders (refer to page. 8-9, Committed Another highlight was the launch of volunteer initiatives to people throughout Covid-19). with employees. These initiatives raised €1.4 million through solidarity projects in areas close to the The company’s commitment during the pandemic headquarters. This amount also strengthened the included a focus on its suppliers, by supporting health collaboration with the charity Caritas, by supporting and safety improvements, guaranteeing payments for online training activities for vulnerable groups whose orders as per the original terms, not cancelling any employment programmes had been suspended.

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Employees at Nueva York

7 Commitment to people throughout COVID-19

As soon as the effects of the pandemic began to be collaboration, Inditex donated over 2.5 million items felt, the Group rolled out a plethora of initiatives of PPE. designed to contain the effects of the crisis. This When the pandemic spread to Europe, the Group made included the activation of a global emergency relief its full logistics and procurement capabilities available programme within its community investment effort to the emergency response effort with the aim of to which Inditex committed over €40.4 million; among acquiring and transporting much-needed materials as other things, this effort enabled the mobilisation of quickly as possible. more than 177 million units of protective equipment Between the purchases made by the authorities and and other basic necessities. private donors, including those made by the Foundation and the Group itself, the Group The first country to suffer the effects of the virus delivered over 177 million priority items, which was , where Inditex’s efforts focused on the were transported on 66 flights: 2,300 ventilators, purchase of personal protective equipment (PPE) 2.8 million N95/FFP2 face masks, over 120 million for distribution to hospitals, with the help of the surgery masks, nearly 44 million pairs of gloves, Tsinghua University Education Foundation and the 425,000 face shields, 540,000 protective suits, 1.5 Hubei Provincial Charity Federation. Through that million surgery gowns, 350 hospital beds, 1.9 million

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tests and 17 robots to accelerate test processing. In The Group also put in place a number of different total Inditex committed €24.6 million to that effort. actions and programmes to tackle the health and

In addition, Inditex made more than 140,000 economic consequences of the Covid-19 pandemic on waterproof health gowns in its facilities, which were its supply chain workers, paying particular attention to distributed locally via the regional authorities. those in greatest need.

It also donated 31,000 items from the In a number of markets affected by the pandemic, the bedding collection (blankets, sheets and pillows) Group also made monetary and material contributions. to health, homeless and women’s refuge centres, in It is the case of US, Brazil, , , , addition to more than one million garments for people Portugal and the UK, where the company supported in need. Those products were distributed mainly different entities and charities such as the New York- through a number of organisations with which the Presbiterian Hospital, American Red Cross, The Door Group works on a long-term basis, including charities such as the Red Cross and Caritas, and public bodies - A Center of Alternatives and Food Bank For New York such as the city council of Coruña, the regional City (US); Fondazione Costruiamo il Futuro (Italy); governments of and Madrid and the IFEMA Alianza por el Centro Histórico (Mexico) and Women’s conference centre, among others. Aid (UK), among others.

9 II. A key year for Inditex’s strategy

Fiscal 2020 was a key year for Inditex’s strategy. The Group has invested over €11 billion in technological The strategic plan initiated nine years ago and the integration, digitalisation, transformation and store investments made to integrate the online and store adaptation since 2012. The Group invested further in fiscal 2020 and that momentum is set to continue in platforms since 2012 enabled the company to continue 2021 and 2022, with capital expenditure of €2.7bn. its business throughout the pandemic, leveraging a single, digitally integrated ‘stockroom’ to respond to These technological investments supported the 77% its customers’ evolving needs. online sales growth in local currencies to €6.6bn putting Inditex among the top global players in the Thanks to those capabilities, the Group was able to online fashion arena. Online visits increased by 50% seamlessly transition to meeting demand from its in 2020 to 5.3bn. stores with the flexibility and efficiency needed. Full The Company leveraged its response capabilities, deployment of the RFID system paved the way for rapid specifically its online channels and agile logistics rollout last year of the integrated stock management capability, to adapt seamlessly to the new environment, system, which is presently available in 5,777 stores with the number of orders per hour surging 57%, and across 89 markets. Thanks to that system, the Group peaking at over 400,000. was able to fulfil 46 million online orders worth €1.2 The Group’s eight brands have 50 million online users, billion from its stores, and stock management was who increasingly show a preference for mobile apps, more precise and efficient. with 132 million active app users in 2020. All the

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Massimo Dutti website

brands also have a strong social media presence, Inditex Open Platform evidenced by their 200 million followers. At the heart of the integrated sales system is the The reach of the integrated store-online sales Inditex Open Platform (IOP), a hybrid cloud-based platform continued to grow, to 91 markets, as did the digital replication of every phase in Inditex’s business various brand’s global websites, which between them model. A virtual building adapted for each department now reach 216 countries around the world. and its needs which integrates the entire product life cycle and enables constant interaction, feedback and In FY20, zara.com launched its integrated online adaptation. platform in , , , , , , Puerto Rico, Iceland, , That entire complex architecture is being developed , , and , among internally by multidisciplinary teams to address the others. Elsewhere, Lefties launched its new online needs of the e-commerce effort and ensure flexible sales platform in Spain and Portugal. adaptation for each area.

The rest of the Group’s brands (, Pull&Bear, The platform has been 80% implemented and will be , Stradivarius, Zara Home, and fully deployed by the end of 2021. Uterqüe) also continued to expand their online reach Thanks to its open and modular nature, it allows all throughout the year. areas of the company to adapt their processes for customer demands in real time and react to their

11 Inditex Open Platform (IOP) microservices adapt to the whole business model

preferences. That customer-driven responsiveness its adaptability, the speed with which solutions can has always been the inspiration for Inditex’s model. be built is increasing exponentially, with the ability to As a result, the IOP has the ability to constantly offer the best possible service in the face of any new generate technological solutions by means of need increasing in tandem. micro-services adapted for each phase of the business process, bringing extraordinary agility and versatility in a purely digital environment. Thanks to

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Zara Pont Neuf, Paris

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Zara Kuznetsky-Motz, Moscow Stradivarius Madero, Mexico

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Quality stores

A cornerstone of the integrated platform, Inditex ended the year with 6,829 stores across the world’s most important cities, shopping streets and shopping centres. Throughout 2020 the Group continued to open new stores and expand existing ones, continuing its focus on quality stores and locations.

In total, Inditex opened 111 stores in 29 markets, fitted with next-generation technology to support the integrated model. The ambition to make its entire store network eco-efficient in 2020 was achieved, and nearly half of the group’s stores are already connected to Inditex’s central energy efficiency control system Inergy. The digital transformation plan completed on target this year with the absorption of 751 smaller and older stores.

Of all the stores opened, expanded and refurbished, Zara Paris Pont Neuf stands out in a building listed as a ‘monument historique’ in 1990, with floor space of over 2,000m2. At another world class retail location, Stradivarius Madero, Mexico

15 Bershka Kalverstraat, Amsterdam

Barcelona’s Paseo de Gracia, the Zara flagship store is possible thanks to the latest in-store technology, added another 800m2 to its floor plan, increasing the whereby each item in stock can be notified to individual sales area to 4,800m2. This iconic store has also been shoppers virtually in real time. fitted with ‘Store Mode’ functionality, another in-house In Moscow, on Kuznetsky-Motz, Zara carried out a software development that improves the customer major refurbishment, thanks to which it has been able experience. The functionality allows customers to to add the Zara Home ranges in a store spanning over precisely locate a piece of within the store, 2,500m2 designed to facilitate simple and intuitive book a fitting room or pay without having to go to the navigation of the latest clothing and home . checkout, all through their mobile devices. Zara’s Bluewater store near London also underwent This innovative functionality, already enabled in several a full refurbishment of its more than 3,100m2 and stores in Spain, the UK, , , Italy and Dubai, welcomed the Zara Home ranges.

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New Zara.com headquarters

In the rest of the Europe the Group’s other brands also Stores such as the expanded Zara in Heraklion, Crete opened flagship stores, such as the Pull&Bear on Grote (Greece), and the store on Tauentzienstrasse in Berlin Markstraat in the Hague (floor area: 1,400m2) and the (Germany), which now boasts a sales floor of 3,800m2, Bershka on Amsterdam’s Kalverstraat (over 1,000m2). are a couple of the latest stores to be equipped with

On the other side of the Atlantic, Zara was also active these automated online pick-up points as part of the regarding openings and refurbishments, opening a integration of stores and online. flagship store, which stands out for the architectural One of last year’s other high-profile openings took place features of its façade, in Bogota, . Other in Beijing (China), on Wangfujing, where the Group Group brands also opened prominent stores in the opened a Zara store of over 3,500m2 – the biggest in Americas, such as the Stradivarius store in Madero Asia – which not only meets the newest technology, (Mexico City, Mexico). integration and sustainability standards, it also features In parallel, the Group continued to selectively set up a new cosmetics section as well as an area devoted to automated online order pick-up stations in its stores, the Zara Edited capsule collections. whereby customers can use a QR code to collect their packages in just a few seconds.

17 The new spaces at Zara Heraklio (Creta) shows the Company’s continuous priority for a quality and enhanced customer experience

New Zara store concept and will continue to be fine-tuned and implemented in upcoming openings. Zara continues to update its global flagship stores and in doing so it is keeping its customers, front and Framed by organic lines or material warmth, the new centre, regardless of how they choose to shop. Framed store image has been designed around five principles: by its online-store integration philosophy, the Group’s stores are increasingly designed to facilitate new Operational agility: enhanced service both in-store, experiences and channel new emotions throughout thanks to efficient stock replenishment, and online, the customer contact and shopping process. spurring the use of stockrooms as local logistics That constant evolution is already tangible in the key platforms for e-commerce fulfilment, thanks to the flagship stores opened or refurbished by Zara in 2020 integrated stock management system.

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Sustainability: with part of the furnishings made from Customer Experience: service areas dedicated to biomass and new areas set aside for cardboard and improving the customer experience in-store, with up used clothing recycling. to eight waiting spots in the fitting rooms, showroom space and returns areas. Dedicated returns lines have Less is more: larger sales floor with reduced display been set up separate from the ordinary checkouts density in tidier spaces to demonstrate the scale of and new areas set aside for online order pick-up and the collections. recycling. Living store: multi-purpose spaces devoted to housing the many different collections inside, such as Edited, Woman, Showroom, Take away, Capsule collections, Zara Home and the new Cosmetics collection.

19 The new Zara.com building (right), integrated in the Inditex central headquarters in (A Coruña, Spain)

New Zara.com building photographers, models, stylists and make-up artists bring the brand’s clothing and looks to life. The third One of the best physical examples of the integrated model is the new 67,000m2 zara.com building, in and fourth floors will accommodate the rest of the which the Group has invested €130 million, including multidisciplinary team: from the image professionals the work done on the surrounding natural ecosystem. who work on Zara’s collections at the start of each

Its 9,000-m2 fifth floor is home to the zara.com season to the team of engineers and programmers studios, all filled with natural light, in which the working exclusively on the IOP. The first and second

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floors of the new eco-efficient and cutting-edge facility and 5G - play a key role in facilitating the use of innovative will be given over to the Zara Man design teams. technology tools.

The 28m-tall building stands out for its glass façade, The building was designed around bioclimatic functions clad with 720 high-energy-efficiency glass modules. and aims to meet the most stringent green building Inside, its square, pillar-free floors are characterised certification: Platinum LEED. The roof is fitted with 554 by wide and diaphanous modular work stations. The photovoltaic panels which, together with the 2,826 installed introduction of the latest connectivity solutions - WiFi 6 outdoors, supply half of the building’s electricity.

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III. Commitment to sustainability

In spite of the challenges over the year, the Group Also as part of the plan, plastic bags have been further accelerated its sustainability objectives, eliminated entirely and the paperless receipt system under which it is working to introduce advanced is being used by all the brands for all online orders. environmental sustainability solutions all along its On the energy front, the Group continues to search for production chain. new sources of renewable power, which now accounts These efforts, in which every department of the for 80% of total consumption, well above the 2020 Group is involved, reached their first milestone over target of 65%, putting the company on track to deliver the year when the Group significantly surpassed its its next target of 90% ahead of schedule in 2021. 2020 target of having 25% of the garments put on The Group has also embraced specific science-based sale being marketed under the ‘Join Life’ label. Join targets (SBTs) and reiterated its commitment to using Lifedistinguishes those items made using more sustainable raw materials only by 2025. sustainable materials and/or processes, and in fact, more than 35% of its garments carried the Join Life Just as important to its strategic and corporate label in 2020. governance commitments is the company’s constant monitoring of its entire supply chain where it fosters This initiative, which takes action at the beginning and the adoption of best social and labour practices. end of the product life cycle, drove growth of 91% in In 2020 the Group made a special effort to help its the use of more sustainably grown cotton, to 73,874 suppliers put in place the health and safety measures tonnes, and led to the completion of the rollout of the needed to keep workers safe during the covid-19 take-back programme designed to give used clothing pandemic, while continuing to push forward with its a second life or to be recycled. Worker at the Centre 2019-2022 strategy, which All the Group’s designers received specialist training focuses in particular on social protection, living wages on the latest best practices in sustainability to ensure and female empowerment. that the most advanced environmental techniques are Last year, the Group maintained all its community implemented from the drawing-board stage. investment initiatives, which mainly involve education, The stores continued to execute their environmental social wellbeing and humanitarian aid programmes. transformation plan and having delivered the target In 2020 those programmes, delivered with around 439 set for 2020 of making them all eco-efficient, are specialist charitable organisations, benefitted over currently focused on connection to the energy 3.3 million people and received funding of €71 million efficiency control system, Inergy (page 15). from Inditex throughout 731 initiatives.

23 IV. Innovation in product, experience and communication

In 2020 as every year, the Group’s brands delivered Beyond this, all the brands launched compelling a range of initiatives related to their products and initiatives and experiences relevant to the customer engagement with the aim of communicating unprecedented circumstances affecting their an image aligned with the creative ideas of the Group’s customers. For example, Zara offered its customers 700-plus designers. the option of adding video greeting cards when sending gifts, at a time when social distancing During the lockdown, the creative teams’ ability to requirements and mobility restrictions have adapt and search for solutions stood out. As recounted prevented many from delivering presents to their by the Lithuanian model, Giedre Dukauskaite, on the loved ones in person. video linked from this page, many Inditex people took their work home, with all the teams working remotely The teams’ responsiveness was also evident in to bring the latest fashions to light. That flexibility and their ability to adapt to their customers’ evolving creativity were unquestionably the fruit of the team preferences, shifting to the design of functional and spirit that pervades everything the Group’s design comfortable - yet fashion-forward and creative - departments do. clothing, without compromising on sustainability. The

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Lithuanian model Giedre Dukauskaite explains how the team at Zara.com organized the collection shootings during lockdowns.

Comfy collections are a good example of that initiative: During the last quarter of the year, Pull&Bear also clothing inspired by sportswear patterns made from launched its costume jewellery line, the Gold and knit fabrics and warm cottons. Silver Plated Collection, as well as unveiling new ideas for the new SS21 season: light pieces and denim In parallel, Zara continued to create cutting-edge clothing given a makeover in soft tones - pastel shades fashion, with new SRPLS editions and The Archive and every variety of green -, combined with floral and Collection, which brought back and updated its marine prints, tie-dyeing and digital graphics. most iconic designs. During the fourth quarter, Zara Massimo Dutti also put out its own jewellery line, in launched its jewellery collection, The Essentials collaboration with the designer, Aurélie Bidermann, Collections, a collection of gold plated sterling silver and in January introduced a new women’s collection designs. Zara Man worked with David Bailey, who made up entirely of pieces that take a new approach shot Lennon Gallagher, while Zara Kids launched its to comfort. Exquisite-quality materials, with a focus new Ski Collection. on comfortwear fabrics such as wool knits in neutral

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Uterqüe

and natural tones, give shape to versatile wardrobe Zara Home, which is poised to launch its new global staples with just the right touch of fashion. image at the store on calle Compostela in A Coruña

Bershka’s Art Series consisted of capsule streetwear (Spain), was exceptionally active all year long. collections in prints featuring iconic Baroque works Throughout the latter part of the year, it launched a of art. Artist Johanna Jaskowska created a special series of capsule collections, designed to meet its Instagram filter for that new collection that was used customers’ household needs, an area to which the over 90,000 times in just a few hours. chain has been paying meticulous attention in recent

‘Stradivarius Meets Art, a look at art and talent’ was collections. the brand’s global effort to give emerging artists For example, right now shoppers can find products greater visibility by turning its stores into small art designed for the pets in their lives as well as a specific galleries. The art exhibited included illustrations, ceramics, macramé, floral art and dance, among other clothing and footwear care line. Another of the disciplines. collections that has proven highly popular was the art and stationery collection and more recently, the music Yoga Dance, a new yoga discipline that combines collection: record players, speakers and earphones, dance movements to hone physical flexibility and balance, was the focus of Oysho, which launched as well as a collection of vinyl records for music fans a specific range designed to give participants to enjoy at home. maximum comfort and total freedom of movement Lastly, towards the end of the year, Uterqüe launched during its performance. In January, Oysho also O.0 Studio, a capsule collection of oversized and launched Compressive, a range designed for medium- and high-impact sports activities made from highly androgynous pieces. Comfort and quality are the durable fabrics in softer finishings thanks to laser- prerequisites for this range, which is flooded with colour, cutting technology. casting off the neutral tones of the previous months.

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Pull&Bear

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Stradivarius

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Zara Home

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Zara

37 38 INDITEX

Communication and Corporate Affairs Dept.

+34 981 185 400

[email protected]

www.inditex.com

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