Inditex’ Profit Slows Despite Continued Global Expansion

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Holiday picks at Zara

Holiday picks at Zara

Arteixo, Spain—Inditex SA, owner of Zara Massimo Dutti and often billed as the “world’s largest clothing retailer,” today reported that its nine-month profit was basically flat despite continued store and Internet expansion.

For the nine months ended Nov. 1, Inditex said net income rose about 1% to 1.67 billion euros (about $2.3 billion) and slightly below analysts’ average estimate for 1.7 billion euros.

Net sales grew 5% to 11.9 billion euros during its first nine months. (An 8% increase in local currencies). The company said its like-for-like sales remain strong.

Growth is ‘On Track’

Earnings before interest, tax, depreciation and amortization, or EBITDA, was flat with last year at 2.8 billion euros.

Gross profit rose 4% to 7.1 billion euros, and gross margin was 59.9.

With some 6,249 stores around the world, Inditex said its expects to add 8% to 10% net new selling space for 2013. Next year, plans calls for a net gain of 325 stores, which is down from an earlier forecast for 440 to 480. Still, the company maintains it’s expansion is underway.

“Globally space growth is on track, this is a year of strong activity … Most of the sales of these small stores will be absorbed in these larger flagship stores,” Inditex Chairman Pablo Isla told analysts on a conference call.

Inditex plans to expand further in countries like China and is adding online stores in South Korea and Mexico in 2014 as it continues to offset weaker sales in Western Europe.

So far for its fourth quarter, Nov. 1 to Dec. 8, Inditex reported a 10% increase in store sales.

Inditex has seen its income slow from the at least 10% growth rates it posted over the last three years as it continues to face a strong euro and a slow economic recovery in its home market of Spain.



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