Annual Report Analysis
NOVEMBER 27, 2014
NIAGARA COLLEGE
BACC 9101
Inditex (Industria de Diseño Textil – Industry of textil design)
 In 1963 Inditex goes into business as a dressmaker.
 In 1975 Zara opens its first store in the centre of La Coruña, Spain, after 12 years of
work by Amancio Ortega Gaona, Inditex's founder, as a textiles maker.
 From 1976-1983 Zara's approach to fashion is a success with the public, which drives its
expansion materialising in nine new store openings in Spain's biggest cities. GOA was
the company's first head office.
 In 1984 it’s the inauguration of the first logistics centre in Arteixo, spanning 10,000
square metres.
 In 1988 Zara first international store opens its doors in Porto, Portugal.
 In 2002 Zara starts building its distribution centre in Zaragoza, Spain.
Inditex Head office is located in Arteixo, Spain. Spain is a sovereign state located on the Iberian
Peninsula in southwestern Europe. Its Capital is Madrid. Its mainland is bordered to the south
and east by the Mediterranean Sea except for a small land boundary with Gibraltar; to the north
and northeast by France, Andorra, and the Bay of Biscay; and to the west and northwest by
Portugal and the Atlantic Ocean. Spanish territory also includes the Balearic Islands in the
Mediterranean, the Canary Islands in the Atlantic Ocean off the African coast
Financial Reporting Environment
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 Standards used by country/company: Spain adopted the IFRS financial accounting
systems since 2005.
 Auditing process: The Group reports the number of suppliers as well as the number of
audits performed during the year. In 2013, Inditex developed and reinforced its control
instruments in order to guarantee supplier identification and monitoring activities at all
stages of the supply process. To this end, in 2013 the Group consolidated an online
system designed specifically to guarantee the control and traceability of its production.
 Inditex Reports contain a large content which includes an overall overview of the
company, such as:
 2 year comparative statement
 Year review
 Sustainable model
 Challenges, Objectives and Opportunities
 Corporate governance
 Sustainability balance sheet
 Annual accounts
 Verification of GRI indicators
INDITEX Financial Analysis by David Dominguez
FINANCIAL STATEMENT ANALYSIS
COMPANY NAME: INDITEX COUNTRY: SPAIN
CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED IN 2013
In Thousands of Euros
Year 2012
Year 2013
Net Sales
15,946,143
16,724,439
Less: Cost of goods sold
6,416,825
6,801,507
Gross Profit
9,539,318
9,922,932
Less: Selling, General and
Administrative expenses
6,412,478
6,852,052
Earnings before interest and tax
(EBIT)
Add: Other Income
3,116,840
3,070,880
14,129
18,182
Earnings before tax (EBT)
3,130,969
3,052,698
Less: Income tax expense
763,956
671,133
2,367,013
2,381,565
Less: Financing expenses
NET INCOME
CONVERSION TO CANADIAN DOLLAR:
RATE OF EXCHANGE:
CDN$ 23,495,133.96
CDN$ 4,314,090.11
CDN$ 3,345,713.94
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Net Sales
EBIT
Net Income
1 CDN $ = 0.71 Euro
INDITEX Financial Analysis by David Dominguez
CONSOLIDATED BALANCE SHEET AS AT 2013
YEAR 31-01-14
YEAR 31-01-13
6,764,961
3,846,726
6,692,150
3,842,918
815,227
847,608
1,676,879
1,581,297
Prepaid expenses
13,022
7,831
Other current assets
242,837
412,528
Total current assets
6,991,300
6,198,166
Property, land, buildings
5,234,581
4,662,407
Investments
82,809
82,509
Other assets
1,770,909
1,453,992
TOTAL ASSETS
13,756,261
12,890,316
Current Assets
Cash
Accounts receivable
Inventory
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Plant and equipment
INDITEX Financial Analysis by David Dominguez
YEAR 31-01-14
Current Liabilities
Bank loans
YEAR 31-01-13
2,521
2,437
3,332,451
3,243,281
127,320
239,346
Total current liabilities
3,462,293
3,485,064
Long-term debt
2,133
4,306
Other long-term liabilities
1,012,873
919,085
Other equity
9,278,363
8,445,963
TOTAL SHAREHOLDERS’
EQUITY
9,278,363
8,445,963
TOTAL LIABILITIES AND
SHARE-HOLDERS’ EQUITY
13,756,261
12,890,316
Accounts payable
Accrued liabilities and unearned
Other current liabilities
TOTAL LIABILITIES
Shareholders’ Equity
Common shares
Contributed surplus
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Retained earnings
INDITEX Financial Analysis by David Dominguez
Ratio
Year
2012
Year
2013
0.28%
(%)
0.25%
Operating profit
margin
0.20%
0.18%
Gross profit margin
59.76%
59.33%
The GPM slightly decrease, meaning that the
company lost some profit during 2013.
Net Profit
14.84%
14.24%
The net profit for the company decrease
symbolizing a bad year for the company, but still
in the positive side.
Current ratio
1.92
1,95
Quick ratio
1.35
1.35
The current ratio increased slightly meaning that
the company now take longer to pay short term
liabilities or obligations.
The quick ratio shows no change meaning they
have $1.35 per every $1 they have to pay.
Profitability analysis
Return on Equity
Ratio analysis
The return on equity has decreased on 0.3 of the
2012 value, meaning less profit for its
shareholders.
2013 shows and increase of operating profit
leaving them with 0.2% less of revenue left over.
Liquidity analysis
Efficiency analysis
(days)
Inventory turnover
period
89.95
89.99
Slight increase in inventory turnover meaning that
they now take longer to use up their inventory.
Collection period for
accounts receivables
19.40
17.79
This ratio shows that the company receives
payments in less time from customers and clients.
Payment period for
accounts payables
184.48
178.83
The company maximized its efficiency to pay its
accounts to suppliers in less time
Leverage ratio
0.050
0.0229
The Leverage ratio decreased showing that the
company now has more equity to debt.
Debt ratio
0.33%
0.33%
The company shows a stable debt ratio meaning
that they haven’t obtain more assets through
financed by debt.
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Leverage analysis
INDITEX Financial Analysis by David Dominguez
Expense for the Business
15%
0%
COGS
4%
43%
Cost of operations
Finance
tax expense
Net income
38%
Conclusion
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Inditex is a well know company that supplies wearables throughout the world, its
financial methods are very similar to the Canadian standards, since they joined the IFRS system
back in 2005. Although this systems still shows some differences between what we have seen
for Canadian companies, it mainly varies in the names, for example: Net Income = Net profit.
The Company has shown a bad 2013 in comparison to the 2012 statement, even though they
are still a very profitable company and manages to stay above the margin in a very difficult
economic crisis that Spain is going through, and the increasing competition on the international
markets, more specific the Swedish company H&M.
INDITEX Financial Analysis by David Dominguez