Buenos días a todos. Good morning to everybody. A warm welcome to all of those attending the presentation of Inditex's results for the half year 2022. I am Marcos López, Capital Markets Director. The presentation will be chaired by Inditex's CEO, Óscar García Maceiras. Also with us is our CFO, Ignacio Fernández. The presentation will be followed by a Q&A session, starting with the questions received on the telephone and then those received through the webcast platform. Before we start, we will take the disclaimer as read. Please, Óscar.
Good morning and welcome to our results presentation. It is my pleasure to join you today. In the H1 of 2022, we have continued to develop our unique fashion proposition. During my presentation, I will share with you 4 factors that, in my opinion, explain our current position, our product offering, an increasingly optimized customer experience, our focus on sustainability, and the talent and commitment of our people. As for our fashion proposition, we are constantly listening to our customers. Through creativity, quality, and design, we can offer the best products in our collections. The second factor that explains our current position is the unique nature of our optimized customer experience. This is something we have been working very hard on, as you know. As a third point, today, all our decisions are framed through our sustainability strategy.
We continue to develop important sustainability projects in areas such as raw materials, manufacturing, distribution, and circularity. We maintain our roadmap with very ambitious goals. The fourth factor which provides color on our current situation and our very singular nature is our people. We are a group of 165,000 professionals, 170 nationalities, fully engaged, committed, and passionate. These are the reasons why sales, EBITDA, and net income in the H1 of 2022 have reached historic highs. We have had a very strong sales performance in the H1 of 2022, and this performance has continued beyond this period, with autumn/winter collections very well-received by our customers. The execution of the business model was very strong. Our operating performance places us in a robust financial position.
We have generated significant free cash flow, taking our net cash position to EUR 9.2 billion. Based on the expansion of our fully integrated platform, we continue to see lower capital intensity going into the future. All this in conjunction with a well-established dividend policy. Let me highlight some key figures for the year thus far, marked by a strong execution of the model. Sales reached EUR 14.8 billion, 24.5% higher versus the H1 of 2021. Sales were positive in all key geographical areas. To put the strength of the operating performance into context, we have generated the strongest H1 gross margin in seven years. The control of operating expenses was rigorous, as they grew well below sales growth. On the bottom line, net income increased 41% to EUR 1.8 billion.
The net income, excluding the provision for the pause of operations in the Russian Federation and Ukraine, would have been EUR 2 billion, 55% higher. Our operations continue to generate strong cash flow. Our diversified presence in 250 markets with low market penetration allow us to enjoy significant global growth opportunities. We have complete confidence in the ability to grow our unique business model. Now, I will hand you over to Ignacio to go into detail behind the headline numbers.
Thank you, Óscar. As you have seen in our release, Inditex had a very strong execution in the H1 of 2022. As Óscar mentioned a few moments ago, sales, EBITDA, and net income all reached historic highs in the period. Sales have progressed strongly. We have managed the supply chain actively, and this has driven a healthy gross margin. Operating expenses have, of course, been managed rigorously. As mentioned, we have taken extraordinary charge of EUR 216 million in order to provision all expected expenses in the Russian Federation and Ukraine for 2022. Net income increased 41% to EUR 1.8 billion. The net income, excluding the provision, would have been EUR 2 billion, 55% higher. Sales have progressed very nicely at +24.5%, reaching EUR 14.8 billion, and grew 25% in constant currency.
Sales have been positive across all key regions. Over the H1 of 2022, Inditex's traffic and store sales increased significantly and continue to do so, with store differentiation being key. Online sales progressed satisfactorily. They were already positive in the Q2 of this year. Based on current exchange rate, we expect a 0.5% positive currency impact on sales for the full year 2022. As we have already commented, sales have been positive across all key regions. Let me elaborate a little bit on this subject. We enjoy a global presence with operations in 215 markets and with a low market share in a highly fragmented sector. We have previously mentioned that the United States is now our second largest market.
In the H1 of 2022, the gross margin reached 57.9% and demonstrated a healthy execution of the business model. Gross profit reached EUR 8.6 billion and grew 24.5%. As a side note, this is the highest H1 gross margin achieved in 7 years. Based on current information, we expect a stable gross margin of ±50 basis points for 2022. There has been very rigorous control of operating expenses across all departments and business areas. Operating expenses increased below sales growth over the H1 of 2022. Including all lease charge, operating expenses grew 7 percentage points below sales growth. The strong execution over this period can be clearly seen in the evolution of working capital. As you can see in this table, the working capital has grown 25% to EUR 4 billion.
In the face of possible supply chain tensions entering the H2 of 2022, Inditex has temporarily accelerated autumn/winter inventory inflows in order to increase product availability without any change to commitment levels. Due to this reason, inventory as of July 31, 2022 increased 43%. The autumn/winter inventory is considered to be of high quality and is consistent with the strong sales trends in previous quarters and the sales performance going into the H2 of 2022. As of September 11, 2022, inventory levels were 33% higher. These actions, in conjunction with the strong cash flow, took the net cash position to EUR 9.2 billion. Now over to Marcos.
Thank you. Over the H1 of 2022, we have continued with our strong expansion and have opened stores in 24 different markets. We have progressed with optimization activities across all concepts. We are pleased with execution of the concepts of the H1, as you can see in this chart. Store sales across all concepts have been robust. Online sales are recovering the high levels of 2021. ZARA has generated an exceptional performance over the period. All the formats have progressed strongly, especially Pull&Bear, Stradivarius, and Bershka. The performance of Oysho should be seen in the light of the strong comparable from last year. Back to you, Óscar.
Thank you, Marcos. I would like to comment on some initiatives this season which are driving the increasing levels of differentiation we are seeing. We continue providing the latest fashion in a fully integrated way. A good example of this is the seamless store and online execution that can be seen in the ZARA Into the Night collection or the ZARA Man Smart Casual collection, ZARA Kids Back to School, ZARA Home: A Modernist Escape created by Vincent Van Duysen, the Pull&Bear's The Power of Color, Massimo Dutti's Leather Skills collection, Bershka's New Metallic collection, Stradivarius: A Matter of Attitude, and finally, Oysho's Cycling collection. I would like to highlight a key store project of this season, the ZARA and ZARA Home store at Battersea in London, to open in October.
London Battersea is one of the most ambitious urban development projects in recent times and will reshape living, transport, culture, retail, and leisure south of the River Thames. We are very proud to be participating in initiatives that move cities and people forward. The store in Battersea will offer the latest fashions with the most up-to-date image. Apart from the three key sections of women, men, and children's wear, it includes dedicated spaces for lingerie, shoes, and handbags, the Origins collection, athletics, newborns, and ZARA Home. It also includes all the features of our digital store mode, allowing a complete digital experience. Customers can also use clothing recycling points, helping us to push forward in terms of circularity. We continue to deliver upon our long-term goals. We offer a unique fashion proposition defined by creativity, design, quality, and beauty.
The continuous optimization of the customer experience is key to our approach. These features continue to be at the center of everything we do. We remain at an early stage in the development of all of this exciting potential. Sustainability and digitalization also remain at the core of our strategy. The level of dedication and passion of our teams all around the globe on a daily basis will always be key for our competitive edge. I would like to reiterate that our main priority is always to invest in the future profitable growth of the business. Additionally, we will of course continue with our dividend policy. As part of Inditex Sustainability Innovation Hub, we are participating in an innovative startup, Circ, which develops a technology that provides a solution for one of the challenge facing our industry, the industrial-scale recycling of textile products composed of polyester and cotton.
The technology developed by Circ makes possible to convert these mixtures regardless of the ratio of their composition and color into new fibers, such as cellulose pulp for viscose and lyocell. As part of our drive towards sustainability, Inditex is a partner in the Regenerative Production Landscape Collaborative, in which the Laudes Foundation and other organizations, government actors, and the private and civil sector collaborate to promote regenerative agriculture and ecosystem restoration in an area of 300,000 hectares in the states of Madhya Pradesh and Odisha in India. The strength of the fully integrated business model has been clear in recent times. We plan to continue developing these key long-term advantages in order to maximize organic growth. The goal is to increase our differentiation in order to provide a unique customer experience.
A key focus is on high quality stores with the aim that they be fully integrated, digital, and eco-efficient. As part of the strategy, we also expect online sales to exceed 30% of group sales by 2024. A stable gross margins have always been a key focus for us. As we continue to invest in the business, we expect to deliver higher returns and lower capital intensity. We expect capital expenditure of EUR 1.1 billion for 2022, which will drive differentiation, digitalization, and sustainability. We enjoy a global presence with operations in 215 markets with low market share in what remains a highly fragmented sector. Based on our unique fashion proposition and the factors that I have mentioned earlier, the model is operating at full pace, and we enjoy very significant opportunities through both organic growth and expansion.
A dividend of EUR 0.93 per share for the full year 2021 was approved in July 2022. An interim dividend of EUR 0.465 per share was paid on the 2nd of May of 2022. The final dividend of EUR 0.465 will be paid on the 2nd of November 2022. Inditex dividend policy of 60% ordinary payout and bonus dividends remains in place. As a reminder, the board of directors also proposed a total bonus dividend of EUR 0.40 per share to be paid in relation to the fiscal 2022 results. Autumn winter collections have been very well received by our customers. Store and online sales in constant currency between the 1st of August and 11th of September 2022 increased 11% versus the record period in 2021. Thank you for attending. That concludes our presentation for today.
We will be happy to answer any questions you may have.
The telephone Q&A session starts now. If you would like to ask a question, please press star five on your telephone keypad. If you wish to withdraw your question, please press star five again. We request that you limit yourself to only one question per turn so we can maximize the number of participants in the session. If you have further queries, you may press star five again after the next person's question has been addressed. Please ensure your phone is not on mute. Good morning. The first question comes from Anne Critchlow from Societe Generale. Please go ahead, Anne.
Sorry. Good morning. Thanks for taking my questions. I've got three, if that's all right. Firstly, on current trading, which looks very strong, does that reflect, to any degree, a much larger summer sale, year on year? The second question is about price inflation. I think you said mid-single digit for spring/summer. Just wondered if you expect that to strengthen further into autumn/winter.
Finally, please could you talk a bit about the customer reaction to the introduction of paid for returns? Do you think there has been any impact on online sales growth from that? Thank you.
Well, first of all, to qualify the trading update, we can tell you that is fully composed of autumn winter sales. Okay. There are no other aspects. We are very satisfied. As we mentioned in the presentation, the collections are high quality, and we have set inventory at the start of the season just to you know deliver on that goal. On the second question about price inflation, what we have mentioned, if you remember the H1, is that we try to have a stable pricing policy. When there are temporary impacts coming from inflation in specific markets, what we do is try to adjust that and to basically absorb that into the gross margin.
This is why we have very much, we believe that mid-single digit will be the same action we will have for the autumn winter as we had for the spring summer. Regarding your third question about the customer reaction to the fact that we are now having some charges for returns, there's been no impact at all. In fact, it's been extremely well accepted. We have now in a significant number of markets, the effects are in terms of customer reaction, we haven't had any significant, you know, setback at all. In fact, what we're having is two very positive effects.
The number of returns to stores has increased, and the period in which the customers return the product is now shorter. I understand that also from a sustainability perspective, customers understand that this is a trend that will go on in the coming years, across the industry.
The next question comes from Richard Chamberlain at RBC. Please go ahead, Richard.
Thank you, James. Morning, everyone. Can I just ask about the inventory increase, please, at the half year and maybe just draw it back a little bit since then. How much of that was accounted for by forward buying, more buying of inventory in advance? I guess sort of linked to that, how do you see your full price sales ratios now compared to before the pandemic? Is there potential for those to normalize now? Thank you.
Thank you, Richard. I think that during the presentation, we made very, very clear that in the face of supply chain tensions going into the H2, we had temporarily accelerated autumn winter inventory inflows in order to increase product availability. In our case, without changing our commitment levels at all, I mean, the proximity sourcing remains in place and is a key part of our proposition. This is something, the increasing inventory at the beginning of the season is something that you're hearing widely from other market participants. In our case, what we can tell you is that 43% increase in inventory is very much in line with the sales trends we have seen in previous quarters, and also with a strong trading update of 11%.
This is why we have qualified that number and mentioned that just 42 days later, the inventory is just down to 33%. Very much consistent with, you know, what we have in terms of trading right now.
The next question comes from Warwick Okines at Exane BNP Paribas. Please go ahead, Warwick.
Morning. Thank you so much. In the H1, ZARA grew much faster than the younger concepts and has done since COVID. Do you think the group mix has permanently shifted towards ZARA, or do you see brands like Massimo Dutti getting back to pre-COVID revenues?
Thank you for your question, Warwick. Well, we are very happy with all of the performance of all of our concepts. They continue to grow year after year with double-digit EBIT margins and with very strong online growth. We are targeting different segments of the market, but all of concepts serve the same business model and the same way of reacting to fashion trends to provide with the customer wants now, fresh and high quality fashion. We consider way that we are covering the different segments of the market. It's the business model that underpins this strong performance, and this business model is progressing at full pace and has great growth potential going forward. Just a reminder, last year, all our concepts grew and all had high PBT as a percentage of sales above 15%.
The next question comes from James Grzinic from Jefferies. Please go ahead, James.
Yep. Thank you, James. Good morning, everybody. Just a couple of quick ones from me. First one, when you talk to supply chain tensions, I presume you mean Asian sourcing, the commodity sourcing out of Asia rather than anything linked to proximity sourcing, just to clarify that. Secondly, can you perhaps update us on the current trading conditions in China? How many of your stores are being constrained by closures or whether that's largely passed now? That'd be very helpful. Thank you.
Thank you, James. You're absolutely right. When we're referring to supply chain tensions, we're talking about the long haul. That's the case of Asia. This is why we have decided to temporarily anticipate the inflows to be well-stocked into the autumn-winter season. As I mentioned, this is absolutely the key part of our inventory right now, and this is what we're selling. Regarding China, I prefer to talk about Asia as a whole. You see that we have had a positive performance in that area. Obviously, it's not exactly the same in those markets where there have been restrictions and in those where they haven't. Again, we can see that we've had a very strong trading across the board that continues into the autumn-winter season.
Thank you. The following question comes from Nick Coulter from Citi. Please go ahead, Nick.
Hi. Good morning. Thank you for taking my question, and congratulations on the results. I'll apologize in advance for this question as it's on depreciation. The implied number for Q2 is down quite substantially. I know there'll be puts and takes, but are there any moving parts that you would call out, please? Thank you.
As you know, Nick, in depreciation, you have, well, the usual depreciation of the asset base, and also, you know, regarding the leases, right? These are the moving parts. All in all, you shouldn't read anything specific into a quarter.
The next question comes from Adam Cochrane at Deutsche Bank. Please go ahead, Adam.
Hi, good morning. Question for me on the price increases and gross margin. The mid-single-digit price increases that you took at the beginning of the year, and you still saw some gross margin pressure in the H1 over the period. As we look at the H2 and input costs going up, energy costs going up, is mid-single-digit price increase going to be enough to hold the gross margin in the H2 of the year, given that it didn't appear to do so in the H1 of the year? Thanks.
Thank you for your question. I think it's a very relevant one. As you have seen, in the gross margin, there are a number of moving parts, some tensions, it's clear. We talked about that during the Q1 conference call. This is why we mentioned that when there are temporary inflationary pressures or there are some currency movements, we just adjust that into the pricing, but within a general thinking of a stable pricing policy. In any case, the gross margin of the H1, 57.9%, is the highest gross margin of the H1 in seven years. Within that context, we are providing a stable guidance for the H2 of the year, talking about ±50 basis points.
All in all, these frames of thinking about the gross margin for the whole year.
The next question comes from Rebecca McClellan from Santander. Please go ahead, Rebecca.
Yes. Good morning. Can you hear me? Hello?
Yeah, Rebecca, we can hear you.
Yes. Sorry. Yeah. Good morning. My question is about the autumn-winter collection, which there seems to be a sort of a really big sort of penetration of suiting and smart wear and jackets, et cetera. Theoretically, that should drive a positive price mix across the season. Is that within the mid-single-digit price increase, or is that mid-single-digit price increase like for like, and would the mix effect come over and above that?
The sales mix is a combination, but again, what is driving our trading update 11% growth up to the 11th of September is clearly the quality for collections, the execution of the model. During the presentation, we have illustrated a number of very relevant collections that we have right now into the stores. The Atelier collection, which involves a lot of, you know, artisan work, embroidery, brocade, et cetera, et cetera, which provides a lot of embellishment. Second, we have also made very clear the collaboration we've had with Narciso Rodriguez, which is a very beautiful collection. We have illustrated it as well.
Obviously, just to wrap up with the collection Into the Night, in which we have used Kate Moss as, you know, as an ambassador of that collection, is clearly the level of newness, the quality, the design, the artful part of what we do, and obviously the execution that is driving our sales, right? Obviously, pricing, our thinking is always about stable pricing. Sometimes we have to adjust based on temporary factors. Again, the main driver of our sales is clearly the collections and the willingness of people to buy the product that we offer, which we believe is clearly outstanding.
The next question comes from Georgina Johanan from JP Morgan. Go ahead, Georgina.
Hi. Good morning. Thank you very much. My question is about looking ahead into next year. I appreciate it's very early days, but of course, there are headwinds in terms of U.S. dollar pressure, and several other of the competitors of reference kind of increasing OpEx inflation from here. As things stand with these external pressures, do you think it's possible and likely that Inditex can hold its EBIT margin into 2023? Or should we just be mindful of that in our modeling of those external pressures, please? Thank you.
Thanks for your question, Georgina. Well, you know that our sector is highly fragmented. As we mentioned during the presentation, we operate in 215 markets with low market shares and with a unique, fully integrated model. While macro and consumer concerns are understandable, we remain totally focused on our collections, and we have a strong confidence in our long-term growth opportunities. We prefer to comment with data. You have seen the sales growth so far this year, +24.5% in the H1 of 2022, and +11% at the beginning of the H2 of the year. We remain confident in our business model and in our capacity of having a very good execution of it. Thank you.
That completes the Q&A session for today. There have been a couple of questions on the webcast platform now. Let's go ahead. The first of which is, can you please provide us with more information about what you're doing with stores globally?
Thank you for the question. Well, as we mentioned in our release, we have opened stores in 24 markets over these first 6 months of the year, with some very relevant openings. To give you 2 examples, such as ZARA Plaza España, Madrid, and ZARA Place Vendôme in Qatar. Additionally, we have had enlargements, refurbishments, and relocations in 50 different markets over this period. A very good example would be our store at Santa Caterina in Porto, which was the first ZARA store opened outside of Spain in 1988. Of course, we have continued upgrading the image in store in far more places around the world. Finally, well, we have covered it during our presentation. We have very exciting new projects like ZARA and ZARA Home at Battersea in London to open in October, as we mentioned again in our presentation.
Could you provide some color, please, on a geographical basis, namely the Americas and perhaps Central Europe in particular?
Well, our performance has been very strong across all geographies, with the only exception, of course, of those markets subject to restrictions. The sales progression in the H1 was very positive on a global basis, up 24.5%. We have not seen any weakness in Central or Eastern Europe, and we are very happy with our performance in the Americas in H1 of 2022. You know that the US is already our second-biggest market, and we seek big growth opportunities in that market. We continue to see a strong demand globally for our collections with high components of fashion, quality, and sustainability.
Thank you, Óscar. That completes the webcast questions.
Thank you to all of those participating in the presentation today. For any additional questions you may have, please get in touch with our capital markets department, and we will get back to you in December for the 2022 nine months results. Thank you again.