Inditex Q1 Profit Best Estimates on Fast Fashion Sales Rise

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Summer look at Zara

Madrid—Despite being faced by currency fluctuations like many international retailers, Inditex, the “world’s largest apparel retailer,” reported Wednesday better-than-expected first quarter profit bolstered by its ever-expanding Zara chain.

For its first quarter, Inditex posted a net profit increase of 28% to 521 million euros (about $588.52 million), beating analysts’ forecasts by 3%. The company said that while an increase of consumer confidence in its European markets helped as did a weak euro and its own weak performance in Q1 2014.

Inditex now operates in 88 markets on five continents.

‘Premium Growth in Style’

The fast-fashion company, which also owns brands such as Bershka and Massimo Dutti, said sales had picked up further in May and June, rising 13.5% from Feb. 1 to June 7 in local currencies.

“Results reflect a very strong operating performance with positive like-for-like sales growth in all geographies,” said Marcos Lopez, Inditex’ capital markets director said.

“Inditex have returned to premium growth in style,” said Graham Renwick at Exane BNP Paribas. “Confirmation is comforting even if coming against the easiest comparative of the year, and the seasonally lightest quarter.”

Inditex’ first quarter sales ending the three months to April 30, increased 13% to 4.37 million euros ahead of forecasts.

Gross margin widened to 59.4% from 58.9%a year ago. Inditex said it expected relatively stable gross margin for the full year, with a lower figure in the second half due to the strong dollar, which would push up costs of products sourced in Asia.

Credit Suisse analyst Simon Irwin told Reuters that could push its costs, when translated into euros, up 9.5% over the next 6 months, but “fragile consumer sentiment would mean it was unlikely to be able to pass those costs on.”

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