Inditex expansion sustains profit
growth
Spain’s Inditex,
the owner of the Zara fast fashion chain, posted net profit up a fifth in the
12 months to February as the world’s largest
clothing retailer by sales opened more than one new store a day last
year.
The Galicia-based company said full-year net profit
rose by 22 per cent year on year to €2.36bn, in line with analysts’ expectations,
as it managed to continue using rapid overseas expansion to temper weak
consumer spending in recession-hit Europe. The
group increased its dividend by a fifth.
In the past year Inditex has opened a net 482 new
stores across 64 markets – including launches in Armenia, Bosnia-Herzegovina,
Ecuador, Georgia and Macedonia – to take its total store count to 6,009
globally. Annual revenues increased 16 per cent to €15.9bn year on year.
In an update on more recent performance, Inditex
said store sales adjusted for local currencies rose 12 per cent from the start
of February to March 11, compared with the same period last year.
Analysts have long doubted that Inditex’s
market-beating form would be able to continue indefinitely, with many arguing
that despite its performance any hint of a slowdown would trigger a sharp
correction in the share price.
After the earnings were published, analysts at
Mirabaud said: “Even after these excellent results, at this stage of the game
we are not going to discover any further hidden qualities of the business model
of Inditex, either in its financial position, or in its ability to outperform
the market quarter after quarter . . . But we think that many of these advantages are
already known and discounted in the price.”
In spite of a highly demanding comparative previous
financial year, which pushed the company’s shares to an
all-time high – and allowed its founder and majority shareholder
Amancio Ortega to leapfrog Warren Buffett to third position on the Forbes rich
list – Inditex also showed signs it was protecting its high gross margins.
The company’s gross margin for the year rose from
59.3 per cent in 2011 to 59.8 last year, which was slightly below analysts’
forecasts of 60 per cent but eased concerns the company would sacrifice margin
to sustain the gains made in 2011.
Earnings before interest, tax, depreciation and
amortisation rose 20 per cent year on year to €3.93bn. The company said its
board would recommend that Inditex increase its dividend 22 per cent to €2.20.