Inditex shrugs off European woes
By The Financial Times
Inditex, the owner of the Zara clothes chain, has again managed to shrug off sagging economic growth in Europe to increase net profits by almost a third in its first-quarter results.
The Galician clothes retailer, the world’s largest by market value, beat analyst expectations across several measures between February and the end of April as it opened 91 new stores – almost one a day in the period.
“This incredible growth will offset the market’s doubts regarding the high exposure of Inditex to the Spanish market as well as other southern European countries,” said analysts at Mirabaud.
Net profit for the period rose 30 per cent to €432m, compared with the same period last year, on revenues that grew 15.4 per cent to €3.4bn, exceeding a consensus forecast by analysts of €3.3bn.
Inditex, which recently overtook Telefónica as Spain’s largest company by market capitalisation, has been one of the few groups listed in the country to provide investors with a return in the last year, rising 12.1 per cent in the 12 months to Tuesday’s close, compared with a 34.4 per cent drop in the blue-chip Ibex 35 index. The shares were up a further 8.2 per cent in morning trading in Madrid to €73.12.
Inditex, which is opening an online store in mainland China in September, said its total store count stood at 5,618 at the end of April. The 91 new stores opened in the first quarter spread across 26 countries and included the company’s flagship Zara outlet on Fifth Avenue in New York, which Inditex has used to raise its profile in North America while continuing to stick to a policy of staying away from traditional forms of advertising and marketing.
Analysts have argued that the company’s business model, based on rapid and agile production grounded at its Galicia headquarters to allow it to rapidly respond to changing styles worldwide, has allowed Inditex to outpace competitors with slower design and manufacturing cycles.
The company also reported its highest ever margin for the first quarter, with gross margin over sales rising by 140 basis points to 60.2 per cent. Operating expenses over this time rose by 13 per cent to €1.3bn.
Inditex’s net cash before a €561m dividend paid in May increased to €3.5bn compared to €3bn in the same period last year.
Earnings before interest, taxation, depreciation and amortisation for the first quarter rose by 27 per cent to €764m.
Earnings per share for the first quarter was €0.69, up from €0.53 in the same period last year.