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Dec 10, 2015
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Strong start to Christmas season at Zara-owner Inditex

By
Reuters
Published
Dec 10, 2015

Profit at Inditex, owner of fast fashion group Zara, rose by one fifth in the nine months to October, with its on-trend offer making a sprightly start to the Christmas season.

Profit of 2.02 billion euros ($2.22 billion) showed the group has kept abreast of the mild weather which has dulled demand for heavier winter clothes around Europe, reflected in weak retail sales data in countries such as Britain.


Inditex


Sales at the world's biggest fashion retailer in the four weeks from Nov. 1 to Dec 3 rose 15 percent, as did sales in constant currencies in the nine-month period, a tad slower than in previous quarters.

"We can say that Inditex is trading just as strongly in the fourth quarter to date as it did in the third," Societe Generale analyst Anne Critchlow said, adding that the numbers should support the share price.

Many market watchers have flagged the rich valuation of its shares, trading at around 34 times 2016 projected earnings, according to Reuters data, versus 24 times 2016 earnings for rival Hennes & Mauritz. Inditex shares have rallied 37 percent so far this year.

Zara, Inditex's leading label, wowed shoppers this season with a minimalist straight-cut look, teaming muted colours with ankle boots and trousers of all shapes and lengths.

Inditex, a global fashion group headquartered in Spain and operating under nine brands, said growth of store space had been in line with its plans, and like-for-like sales growth had been "solid", without elaborating further.

However, gross margin, a closely-watched measure of profitability, slipped to 58.8 percent from 59.4 percent last quarter, likely affected by a strong U.S. dollar which increases its supplier costs in Asia.

But this affects Inditex less than its peers because it tends to source closer to home, helping it to lend itself more quickly to changes in tastes and deliver them speedily.

Core earnings (EBITDA) rose 18 percent to 3.33 billion euros, in line with a Reuters poll.

The company will hold a conference call at 0800 GMT.

$1 = 0.9092 euros


 

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