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Zara-owner Inditex reports strong rise in first-quarter profit

By
Reuters
Published
today Jun 14, 2017
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Inditex, the world's biggest clothing retailer and owner of the Zara brand, reported an 18 percent rise in first-quarter net profit, in line with analysts' forecasts and stretching its lead over rivals like H&M.


Customers snapped up items like boyfriend jeans and kimono-style dresses - Photo: Zara


The Spanish company, which also owns younger fashion chain Pull&Bear and upmarket label Massimo Dutti, said on Wednesday that net profit was 654 million euros ($733 million), while earnings before interest, tax, depreciation and amortization (EBITDA) were 1.1 billion euros. That was up 17 percent year-on-year and above estimates.

Inditex has consistently outperformed H&M and other outlets in the past few years as a result of its online growth and fast-fashion model that allows it to whistle the latest trends from the runway into stores within days.

Analysts expect Inditex to benefit from a more positive currency environment this year. Close to half of the company's 7,385 stores, operating in 93 markets, report their earnings in currencies other than the euro.

Inditex's local currency sales rose 12 percent from Feb. 1 to June 3, as customers snapped up items like boyfriend jeans and kimono-style dresses.

This implied same currency sales growth of 10.8 percent in the first five weeks of Inditex's second quarter once the effect of new store openings was stripped out, Societe Generale analyst Anne Critchlow said in a note.

"With currency impacts looking broadly neutral for the remainder of the year both in terms of translation and transaction, we see a year of good EBIT growth and margin increase at Inditex," Critchlow said.

In Inditex's first quarter, which runs from Feb. 1 to April 30, it opened new stores in 30 markets and continued with an online push in southeast Asia, launching Zara online in Singapore, Malaysia, Thailand and Vietnam. It will launch in India later this year.

Zara makes up two thirds of group sales.

Inditex's net sales rose by 14 percent from the year before to 5.6 billion euros in the first quarter also just above analysts' forecasts.

($1 = 0.8917 euros)


 

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