Inditex sets the pace for fashion retailers
The Financial Times
Spain’s Inditex, owner of the Zara fashion label, reported robust first-quarter earnings driven by rapid growth in emerging markets, while rival Hennes & Mauritz produced a set of below-forecast sales figures.
Inditex, the world’s largest fashion retailer by sales, continued its breakneck expansion in the first three months of the year, opening new stores at a rate of 12 a week in 29 countries, taking its total to 5,154 stores in 78 countries.
These included the Galicia-based group’s first two stores in Australia, part of an expansion into the southern hemisphere that makes it the first global retailer to sell clothes specially tailored to the region’s seasons.
Inditex said it also planned to launch in South Africa, Taiwan and Peru by the end of the year.
The results were interpreted by analysts as further evidence that Inditex’s production model, by which almost half of its clothes are made in Spain, Portugal and Morocco, was enabling it to avoid problems caused by high cotton prices and rising Chinese labour costs that have troubled rivals such as H&M, which missed analyst forecasts for its monthly sales figures.
H&M reported a 2 per cent increase in like-for-like sales during its fiscal second quarter to SKr27.6bn ($4.26bn), lagging a consensus forecast of SKr28.4bn, with monthly sales figures for May also falling short of expectations, rising 2 per cent versus the consensus forecast of 5.4 per cent.
H&M, which announces second-quarter earnings next week, has been hit harder than Inditex by rising input costs.
“Inditex has ... proven that its differentiated sourcing model can yield higher sales and less gross margin risk,” said Karen Howland, analyst at Barclays Capital.
After opening online Zara stores last year for the first time, Inditex said equivalents for its Massimo Dutti, Pull and Bear, Bershka and three other brands would be opening in Europe in September, along with an online Zara store in the US.
Inditex’s net profits to the end of April rose 10 per cent to €332m ($476.5m), as net sales for the first quarter rose by 11 per cent year on year to €2.96bn.
Earnings before interest, taxation, depreciation and amortisation rose to €601m (€560m).