The retail fashion group Etam saw its net profit rise by 26.1% in the first half, driven by positive results in Europe, while China, long struggling, began to show “encouraging signs."

For the first six months of its 2014 fiscal year, the group posted a net profit of 11.1 million euros, as compared with 8.8 million a year earlier, the retailer said Thursday in a statement.

The company’s operating income rose by 23.9% to 22.8 million euros, driven by improved sales in Europe, and the stabilization of losses in China. It also benefited from acceleration in sales in China of residual stock from past seasons.

This negatively impacted its gross operating surplus (EBITDA), however, due to the sale of the inventory at reduced prices. It declined by 29.8% to 28.9 million euros, also penalized by a difficult start to the year in China.

The trend in China began to be reversed by the beginning of March, however, Etam general partner Laurent Milchior told the AFP.

"It is too early to be positive about the trend, but it's an encouraging sign. The work we have done there for over a year is beginning to pay off," he said.

The group undertook profound measures to effect a repositioning of its range and a restructuring of its stores, including a good amount of closures (88 between January and June).

Etam’s revenues have grown overall by 0.3% over the first six months of 2014, including +3.2% in the second quarter alone, despite the negative impact of foreign exchange rates due to the depreciation of the yuan compared to the euro.

Its gross margin increased slightly from 57.7% of sales in the first half of 2013 to 58.7% for the same period in 2014.

Etam doesn’t offer forecasts for the end of its fiscal year, judging that it must remain "cautious" because of the highly uncertain environment in its key markets, including France.

It has, however, continued to invest in renovations for its stores in France. Beginning on October 2, it will also enter a new market segment by launching a range of makeup and beauty products, to become available in its Etam Lingerie stores.

Further international openings are also planned for its brand Undiz International (Germany, UAE and Qatar) and in France for its brand 1.2.3.

dep / fga / eb

Paris, August 28, 2014 (AFP)