Inditex Q1 Results Weakest in Four Years

Spring at Zara

Spring at Zara

Madrid—Inditex, which bills itself as a biggest fashion retailer in the world, today reported first quarter results that were its weakest in four years.

Hindered by an abnormally cool spring in much of Europe as well as currency fluctuations, the parent of Zara posted a 1.4% increase in its net profit to 438 million euros (about $583 million). That missed the 440 million euros analysts’ average expected, but still puts the company on track to make nearly 2 billion euros of net profit this year.

Net sales rose 5.2% to 3.6 billion euros (about $4.76 billion) driven by new store openings. According to Inditex executives, the company plans to open 80 to 100 new store openings a year in the coming years.

Inditex’ first quarter sales were hit by an abnormally cold and wet spring in some of Europe, including Germany, the United Kingdom, France and Spain. The company blamed currency fluctuations for its weaker profit growth, too.

Marcos López, capital markets director at Inditex, said the company is satisfied with the results especially since last year was extremely strong for Inditex. Comparable store sales from May 1 to June 7 were up 8%.

And gross margin, should be “stable” the rest of the year after narrowing 0.6 percentage points to 59.6% in the first quarter, said Pablo Isla, chief executive.

The company intends to focus on opening stores internationally rather than in its home country of Spain which is facing another year of double-dip inflation. Inditex recently opened 49 new stores in 30 different countries, taking its total to 6,058 in 86 markets.

The earnings “show the company is able to keep growing during challenging economic times,” said Daniel Lacalle, a senior fund manager at London’s Ecofin Ltd. “It’s managed to post profit growth and solid margins, which is remarkable.”

 

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Jeff Prine, Editor at Large, Accessories Magazine
Jeff returns as a regular contributor to Accessories magazine. Initially Jeff worked as senior editor at Accessories more than 20 years ago and his love of the industry has followed him until present. Since his tenure here, Jeff has continued to report jewelry, watch and other luxury goods trends as executive editor at Modern Jeweler magazine, fashion director at Lustre, and as contributor on products and trends for consumer and trade publications and websites. In addition to his editorial experience, Jeff also served as an adjunct instructor for accessories merchandising at Fashion Institute of Technology. jeffp@busjour.com