Inditex believes impact of hard Brexit would not be significant for group

Inditex thinks that the impact on the group of a no-deal Brexit from the EU will not be “significant", as indicated in the report on the group’s H1 results presented to Spain’s National Securities Market Commission (CNMV) on Friday.

Among the main risks arising from Brexit, Inditex has identified potential delays in the transit of goods, economic impacts arising from the imposition of tariffs and from currency fluctuations, and possible restrictions on the free movement of persons, “as well as the derivative effects of contractual risks or issues in managing key third-party relationships,” said the group.

However, Inditex stated that, despite the significance of a no-deal Brexit, “in-depth analysis shows that the residual risk for the group, once it will have implemented the appropriate mitigating actions, is not expected to be significant.”

Currently, Inditex operates 108 stores in the UK, over half of them (63) flying the flag of its leading fashion chain, Zara.

In the document, the world’s largest textile distribution group added that, although there is some uncertainty about the Brexit date, as well as on future developments in this regard, a no-deal exit from the EU will imply changes to the regulatory environment within which the group operates in the UK, and also changes to the UK-EU trading relationship, which would then fall under World Trade Organization rules.

This change would result in cross-border trade being subject to customs controls and tariffs, said Inditex.

From a broader perspective, the group explained that geopolitical, demographic and socio-economic changes triggering further risks in the countries where Inditex sources from or distributes, as well as weaker consumer demand in certain markets, and the modifications of weather patterns induced by climate change, which can in turn affect demand, are some of the “factors which might impact the optimal achievement of the [group’s] business objectives.”

“In addition, the industry’s high degree of competitiveness, driven by new technologies and disruptive innovations, might influence [the group’s] ability to compete in an environment where consumer behaviour is constantly changing,” concluded Inditex.