Global Expansion Pushes Zara Parent into 2011 Profit Surge

Zara, Inditex' largest retail brand, opened a concept flagship store earlier this month on Fifth Avenue in New York.

Arteixo, Spain—Inditex, operators of Zara stores, reportedly the world’s largest apparel retailer, said today that its 2011 profit rose 12% thanks to its continued expansion worldwide.

Despite the economic slowdown in its key region, Europe, the company posted a profit of 1.932 billion euros (about $2.56 billion), just beating analysts’ average estimate for 1.92 billion euros.

Net sales for Inditex’ fiscal year, which was February 2011 to January 2012, rose by 10% to 13.793 billion euros. Comparable store sales rose 4%. Its adjusted figure for earnings before interest, tax, depreciation and amortization also rose 10% to 3.258 billion euros.

Massimo Dutti to Open in New York 

“Like-for-like sales and gross margin seem healthier than expected in the final quarter,” Societe Generale analyst Anne Critchlow said. “On every level of the high quality indicators, it is a beat.”

In a conference call with analysts, Inditex president Pablo Isla said: “We have achieved sales growth in all the different markets.”

Spring flower bedecked entrance to Zara's new Fifth Avenue flagship store

The company, which now sells on five continents, said it will continue to step up expansion, especially in Asia. In the last year, it opened Zara stores in Australia, Taiwan, Azerbaijan, South Africa and Peru, and expanded in Japan, South Korea and India.

In China, “2011 has been a year of strong expansion, 2012 will continue to see strong growth. We plan to open around 130 stores per year over the next few years,” said Isla.

Indeed, China remains a priority. Of the 483 new stores it opened last year, 132 were in China. And the company plans to start selling Zara online in China later this year.

“Zara will begin offering its fashions online in China during next winter season, extending its e-commerce business to one of the fastest-growing markets for Inditex concepts,” the company stated.

Inditex has 5,527 stores in 82 countries and sells under its retail brands Zara, Pull and Bear, Bershka and Massimo Dutti. This year alone, the company plans to add another 480 to 520 stores.

Earlier this month, the company opened a Zara concept store flagship at 666 Fifth Avenue in New York. The 32,291-foot, three level store features two “catwalk” corridors on each floor that lead to boutique-like cubes showcasing specific collections.

The company also installed more environmentally sustainable features into the design, including motion detectors that dim the lights when there are no shoppers are around, electronically-regulated air curtains near store entrances and an energy-efficient heating and air conditioning system.

Zara’s former Fifth Avenue location a few blocks north on Fifth Avenue will reopen as the first Massimo Dutti store in the United States.

 

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