Inditex expansion pushes Asia
sales above group’s home market
By The Financial Times
Shares in Inditex
rose to an all-time high as second-quarter earnings from the largest clothes
retailer in the world by sales calmed investor
concerns that its rapid growth had begun to slow.
The company, which began life as a Galician
bathrobe manufacturer three decades ago, underlined its increasing
internationalisation as sales in Asia and Africa overtook those from Spain for
the first time in its history over the first half of the year.
Inditex, which divides its sales between Spain,
Europe, America, and Asia and the rest of the world, said the latter unit now
accounted for 21.7 per cent of total revenues, surpassing the 19.3 per cent it
derived from its home market for the first time in its history.
At the same time the company opened new stores at a
pace of almost four a week over the first six months of the year, taking its
total to 6,104 across 86 countries.
Inditex, which owns brands including Massimo Dutti
and Pull & Bear alongside its main Zara brand, has largely managed to shrug
off the sharp falls in consumer spending across the rest of Europe, which
remains its main market making up almost half of sales.
A slight slowdown in sales in the first quarter of
Inditex’s trading year had caused concern among some analysts that in spite of
the company’s rapid growth it would be unable to continue surpassing itself
each quarter.
News of Inditex’s second-quarter earnings sent its
shares up to a new all-time high of €112.60 in early trading as investors took
the analysts forecast-beating numbers as evidence that the company has
continued to expand in spite of very demanding comparable figures from the year
before.
Over the first half sales rose 5.7 per cent to
€7.65bn year on year, while like-for-like sales rose by 2 per cent. Earnings
before interest, taxation, depreciation and amortisation in the first half rose
0.2 per cent to €1.62bn, while net profits increased 0.8 per cent to €1.53bn.
“Although these results could erode some concerns
originated in the previous quarter . . . we think that they do not totally clarify if the
deceleration persists or even if record margins are sustainable,” said analysts at Mirabaud, who
have argued that it will be very demanding for Inditex to match current market
consensus for growth for this year.
Analysts at Citi, however, argued that strong
like-for-like gross profit growth of 17 per cent from the first to the second
quarter showed that Inditex was on track to meet expectations. They were also
encouraged by the company’s announcement that store sales in local currency
terms rose 10 per cent from the start of August to the middle of this month.
Over the quarter the company’s considerable net
cash position continued to increase, moving up to €3.6bn, including the payment
of €686m in dividends, compared with €3.48bn in the same period last year.
Inditex shares were up 0.8 per cent at €111.10 on
Wednesday.