Inditex surprises with growth spurt
By The FinancialTimes
Profits over the first half of the year at Inditex, the Spanish owner of the Zara clothes chain, jumped by almost a third as the world’s largest fashion retailer by value managed to sustain growth in both the sluggish economies of western Europe and emerging markets.
The Galician-based group, majority controlled by founder and Spain’s richest man Amancio Ortega, said that net profit over the first half rose to €944m, an increase of 32 per cent compared with the year before, as it opened 166 new stores, taking its total count to 5,963 globally.
Over the period sales rose 17 per cent to €7.23bn, with like-for-like sales increasing 7 per cent – the highest recurring growth rate since the first quarter of 2007, demonstrating Inditex’s recurring ability to shrug off shrinking consumer spending in Europe as it wins market share from rivals.
The strong results came in above forecasts by analysts, who were again taken by surprise by the company’s recurring ability to meet and exceed already lofty market expectations.
“These results show, once again . . . the ability of Inditex to offset all the macro uncertainties thanks to its unequalled business model in the apparel retail sector,” analysts at Mirabaud said.
A reduction in operating expenses helped earnings before interest, taxation, depreciation and amortisation increase 29 per cent year-on-year to €1.62bn, while the company again managed to increase its gross margin over sales to the highest level ever reached in the first half of a year, rising 120 basis points to 59.6 per cent.
This margin growth was helped in part by foreign exchange movements, with a weaker euro helping the company’s top line growth immediately while the higher costs for sourcing materials and other services from Turkey and the far east are spread out due to longer lead times, analysts from Espirito Santo said.
In a continuation of further diversification both internationally and into online sales, Inditex said it had launched its web platform for Zara in China in early September.
Net cash as a result of the jump in profits rose from €2.9bn last year in the first half to €3.4bn, including the purchase for €192m of two flagship London stores on Oxford Street and Bond Street.
Inditex shares rose 3 per cent to €94.70 in morning trading.