The Covid-19 pandemic has driven annual profits at Inditex, the world’s largest clothing retailer, down by over two-thirds to €1.1bn as many of its stores were forced to close.

The crisis has been particularly challenging for the group since Inditex focuses on fashion, rather than the casualwear that people often wear at home, and only around 14 per cent of its sales were online before the pandemic hit.

The fourth quarter fell short of market expectations, with sales down 25 per cent from the same three months a year before. The consensus was for a 21 per cent decline and net income more than halving for the period.

The company, known for brands such as Zara and Massimo Dutti, said on Wednesday that sales fell 28 per cent last year to €20.4bn in 2020. However it added that the second half was better than the first thanks to reduced costs and inventory, the migration of business online, and a recovery in activity, with €1.3bn of net profits attributable to the final six months of the fiscal year.

Inditex added that trading was improving. Sales from stores and online were 15 per cent lower in February than in the same month last year. But it indicated that the trend was reversing, with sales showing a drop of 4 per cent in the first week of March. Excluding the five countries where store closure is mandatory, sales climbed 2 per cent and the company expects “practically 100 per cent” of its stores to be open by April 12.

“Inditex has emerged stronger after such a challenging year,” said Pablo Isla, executive chairman, adding that the group’s “global, flexible, digitally integrated and efficient sales platform . . . places us in an excellent position for the future”.

Inditex cut its operating expenses by 17 per cent and inventory by 9 per cent during the year, maintaining its gross margin at 55.8 per cent, despite temporary store closures during the fourth quarter, traditionally the busiest of the year. It took an €287m hit to inventories in March 2020, in anticipation of the effects of the pandemic.

The retailer’s online sales increased 77 per cent in local currencies to €6.6bn.

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