Inditex’ First Half Profit Jumps on Fast Fashion Successes

Image from Massimo Dutti’s fall ad campaign. The upscale division of Inditex opens its first U.S. stores at 689 Fifth Avenue next month.

La Coruna, Spain—Continued demand for its fast fashions and increased merchandise offerings online helped push Inditex, parent to Zara, into a 32% increase in first half profits, the world’s largest apparel retailer reported today.

For the six month ended July 31, Inditex earned a profit of 944 million euros (about $1.23 billion) from 717 million euros a year ago and beat analysts’ forecast for 905 million euros. Earnings per share rose to 151 euros from 115 euros.

Net sales climbed to 7.239 billion euros (about $9.4 billion), up 17% from 6.209 billion euros last year. Comparable store sales increased 7%, including 82% of total store sales. Gross margin widened to 59.6% from 58.4%.

The company, which operates eight brands, including Massimo Dutti, Bershka and Oysho, credited its increases with stepped up offering online and in Asia and the Americas which offset lower spending in its recession-plagued home country. Sales in Europe outside of Spain narrowed to 44% of total sales, down from 45% a year ago. The Americas accounted for about 14%, up from 12% a year ago, and Asia and the rest of the world grew to 20%, up from 17%.

Expansion in the Americas, Asia Helps

In fact, Spain’s share of Inditex’ sales narrowed to 22% from 26% a year ago. In the first half the company opened some 166 new stores including Zara, Pull and Bear, Stradivarius, Bershka, Oysho, and Massimo Dutti, in 39 markets. Zara, its largest division, saw a 20% sales increase to 4.836 billion euros.

Inditex also indicated that keeping a “tight control” on operating expenses helped, too. Operating income increased 35% to 1.238 billion euros. Earnings before interest, tax, depreciation and amortization or EBITDA increased 29% to 1.621 billion euros.

Retail analysts were particularly impressed given the economic uncertainties particularly in Europe, and shares of the company rose in early trading today.

“The drivers are certainly there–the rapid rollout of online sales and fast fashion–but even so it’s a spectacular performance,” said Societe Generale analyst Anne Critchlow.

 

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