Cost cuts and turn-of-year recovery lift Inditex

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Inditex, the Spanish fashion group behind the Zara brand, on Wednesday gave its most upbeat outlook for two years as it reported a 5 per cent year-on-year rise in net profits for 2009.

Inditex 2009 results
SalesNet profitDividend
↑7%↑ 5%↑14%

Pablo Isla, chief executive, said same-store sales growth should turn positive again this year after a negative 2008 and a virtually flat 2009. “I can’t quantify it, but the aim of our management team is to have positive like-for-like sales growth in 2010,” he said.

Sales in recession-hit Spain, which accounts for nearly a third of group revenues, had remained “stable” throughout the two-year downturn, he added.

Inditex, whose rapid expansion has made it the world’s largest apparel group by sales, opened a net 343 stores in 2009, with 98 per cent of the total outside Spain. At the end of January, it had a total of 4,607 stores in 74 countries.

Asia remains the focus of international expansion: Inditex opened 41 new stores in China, 12 in South Korea and 10 in Japan during the year.

In May this year, the company will open its first Zara outlets in India as part of a joint venture with the Tata group. Store roll-out in the culturally and geographically complex country of more than 1bn inhabitants would be much slower than in other emerging giants such as China, cautioned Mr Isla. However, he described the Indian debut, with inaugural stores in New Delhi and Mumbai, as “an important strategic step for Inditex”.

“We are certain that in the medium to long term that India will be an extremely important market for us,” he said.

Inditex unveiled net profits of €1.3bn ($1.8bn) for the 12 months to the end of January 2010, compared with €1.25bn a year ago. Sales rose 7 per cent to €11.1bn, as expansion in Asia helped offset weakness in the domestic market and other faltering European economies. After stripping out currency factors, global revenues rose 9 per cent, the company said.

On a same-store basis, sales were flat, as an increase in the second half offset a decline in the first. The fourth quarter proved particularly robust.

Mr Isla said the results were “satisfactory”, while Bernstein Research described the company, which also owns the Massimo Dutti, Bershka and Pull and Bear lines, as “the fast-growth mass fashion retailer in our coverage with greater potential”.

“We do not foresee major hiccups for Inditex in 2010,” it said in a note.

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