Fast-Fashion Giant Zara Warns Of Currency, Tariff Headwinds After Weak Early Summer Sales

Inditex SA, the owner of the world's largest clothing brand Zara, reported weak numbers for last month and warned of currency headwinds, sparking concerns of a potentially lackluster summer shopping season for the fashion industry.

According to a Bloomberg News report, the Spanish retailer's sales rose 6% in the five weeks to June 9, excluding the impact of currency fluctuations. That was weaker than last year's start to the summer season.

The report noted that while Inditex has fared better than its rivals through tight inventory control, it is not immune to a drop in demand prompted by the global trade war.

The company is now warning that unfavorable currency rates will shave off 3% of sales this year, up from the 1% it had expected previously.

European brands typically benefit from a stronger dollar, as they make more money when converting U.S. revenue to local currencies. The U.S. dollar has experienced notable depreciation recently, with the Dollar Index (DXY) declining 3.5% since its recent high in mid-May.

Sweden's H&M and German brand Puma have also flagged headwinds from currency fluctuations and tariffs.

According to the Bloomberg report, Inditex said it would reorganize its supply chains and rely more on suppliers in Spain, Portugal, Turkey, and Morocco to manage the situation.

Meanwhile, the retail giant is expanding and renovating its stores globally, and has earmarked $2 billion for the effort this year.

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