Inditex Posts Half Year 14% Profit Rise

Arteixo,Spain—Fast fashion retailer Inditex SA posted today a 14% rise in profit for its first half due to sales growth in new markets and costs controls despite some gross margin declines.

For the first six months of its fiscal year, Inditex, best known here for its Zara specialty chain, reported net income increased to 717 million euros (about $981.25 million), up from 628 million euros a year ago. That beat analysts’ average estimate expecting 672 million euros. Earnings per share were 1.15 euros compared with 1.01 euros a year ago.

First half net sales grew 12% to 6.21 billion euros from 5.53 billion euros last year, as Inditex continues to expand globally and added e-commerce to the mix, including Zara’s first online store in theUnited States. On a constant currency basis, sales increased 13%, while comparable store sales were up 6%.

Sales reached 6.2 billion euros, while the gross profit margin fell 100 basis points to 58.4 percent, less than most analysts’ anticipated.

In the six months, gross profit rose 11% year-over-year to 3.63 billion euros, while gross margin declined to 58.4% from 59.4% a year ago, less than most analysts’ predicted.

Earnings before interest, tax depreciation and amortization or EBITDA grew 9% to 1.26 billion euros, and EBIT increased 10% to 914 million euros.

Inditex’ Zara began online sales in the United Stateson September 7, and is set to launch online shopping inJapanon October 20. It also recently rolled out e-commerce for its other brands in some European countries.

Online and New Market Expansion Continues

The company, which also operates Bershka, Pull & Bear and Massimo Dutti chains, opened 177 stores in its first half, bringing its total stores in some 78 markets to 5,221.

In the coming months, Zara plans to enter new markets, including South Africa, Taiwan, Georgia, Azerbaijan and Peru. It also recently rolled out e-commerce for its other brands in some European countries.

Pablo Isla, chairman/ceo, said Inditex saw sales growth in all its main markets during the first half. “The evolution of sales and the reception of collection has been very strong in many markets.”

By region, Europe accounted for 45% of sales and theAmericasfor 12% of the total. Spain’s share declined to 26% from 28% last year. For Asia and other regions, share of sales increased to 17% from 15% a year ago.

Analysts called the half year report “astonishingly strong given the environment.” Inditex’ online rollout “is clearly working very well,” said Simon Irwin of Liberum Capital. The 6% increase in comparable store sales “is a big beat” added Société Générale analyst Anne Critchlow.

However, the company’s report that sales rose 9% at constant exchange rates from Aug. 1 to Sept. 17, down from a 13% increase over the previous six months, gave some analysts pause. Analysts’ estimates expect a slowdown in comparable store sales to about 1% to 2% down from 8% to 9% in Inditex’ second quarter.

But Inditex executives told analysts in a conference call that the level of sales growth in the last seven weeks is healthy relative to a tough comparison with the same period last year.

“Current trading is not very different at this point from the same period last year,” the company added.

 

Like this? Share it!