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UPDATE 2-November lockdowns frustrate Zara owner Inditex's recovery

(Adds company comments on store traffic, collections, inventory)

MADRID, Dec 15 (Reuters) - Zara owner Inditex said many of its stores were closed or operating with restrictions as a fresh wave of COVID-19 lockdowns hindered the fashion giant’s path to recovery.

The apparel sector, Europe’s hardest-hit retail sector at the start of the pandemic, recovered slightly over the summer as lockdowns lifted and demand bounced back - but a return of restrictions has put sales of clothing back on shaky ground.

Spain’s Inditex booked a 14% drop in sales from August to October, a recovery from the 31% fall in the previous quarter. But it took another hit in November as stores were forced to close in major European markets like Britain and France.

The company, which also owns the Bershka and Massimo Dutti brands and is the world’s biggest fashion retailer by revenue, said 21% of its stores globally were closed in November.

Most reopened in the first week of December, but 8% are still shut and an additional 10% must remain closed at weekends. A “very significant number” are operating with restrictions such as limits on capacity and opening hours, the group said.

Inditex said customers were eager to return to stores when they re-opened as evidenced by strong in-store traffic when lockdowns were lifted. It said its autumn/winter collections had been well-received and online sales were up 76% from last year.

In a sign of how retailers have adapted to changing lifestyles in the pandemic, flagship brand Zara has showcased “stay-at-home” styles like an oversized cardigan for 29.95 euros ($36) and wide-legged knitted trousers for 39.95 euros on its website in a season usually dominated by sequins and stilettos.

Arch rival H&M said on Tuesday that net sales fell 10% in local currencies in its fourth quarter, with an accelerating slowdown towards the end of the September-November period.

Inditex reported third-quarter net profit of 866 million euros, in line with a second-quarter profit rebound, but still down 26% on the year-ago period. Total sales reached 6.05 billion euros in the third quarter, in line with analysts’ forecasts.

Its shares were down 2.2% at 919 GMT, compared with a 0.58% drop in the STOXX Europe 600 Retail index.

Despite the fall in sales and store closures, Inditex said it was holding 11% less inventory than last year as its tight-supply chain model and ability to manage returns in-store prevented goods from piling up.

$1 = 0.8232 euros Editing by Alexander Smith and Pravin Char

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