Inditex buoyed as first-half sales beat expectations

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Inditex on Wednesday posted a better than expected rise in sales over the first half year, after the Spanish fashion retailer managed to hold down costs and press ahead with a string of new store openings and online launches.

The owner of Zara said net sales in the first six months of the fiscal year reached €8.09bn, a rise of 6 per cent compared with the same period last year. Adjusted for new store openings, the world’s largest fashion retailer by market value posted like-for-like sales 4.5 per cent ahead of last year’s results.

Net earnings fell from €951m to €928m, mainly as a result of currency movements, but still came in ahead of analysts’ expectations. The gross margin, a closely watched indicator in the retail sector, slipped one point, to 57.6 per cent.

Analysts welcomed the results, noting that currency effects were likely to have less of an impact on Inditex’s financial performance in the months ahead. “We expect the fading adverse effects of currency trends and ongoing robust underlying trading to drive a return to double-digit earnings per share growth in the second half,” Citigroup said in a research note.

The upbeat outlook was echoed by the group, which said sales in the most recent period, between August 1 and September 12, rose by 10 per cent in constant currency terms. “The current base offers huge growth potential for the coming years.” Pablo Isla, the Inditex chairman and chief executive told analysts in a conference call.

Inditex is widely seen as a pioneer of the “fast fashion” industry, which seeks to respond as quickly as possible to the latest fashion trends and customer demands. It has 6,460 stores in 88 countries, but still designs and produces most of its higher-value products close to the group’s home base in rural Galicia.

Mr Isla said that the group’s schedule for store openings and the launch of new online platforms was on track. In recent years, the retail group has followed the industry trend towards online sales, setting up websites and sales platforms for Zara and other Inditex brands in 25 markets. “In the weeks to come, Zara’s online platform is due to go live in South Korea, and it will expand its online offering in China with the opening of its virtual shopfront on Tmall [the Chinese retail website],” the group said on Wednesday.

Mr Isla said the group had seen sales growth in all its markets, including in Spain, which is just emerging from a prolonged economic downturn.

Inditex, which still relies on its home market for almost a fifth of group sales, has defied the economic gloom by investing in new stores – including a Zara flagship store on Calle Serrano, Madrid’s most prestigious shopping street. “We were saying [at the full-year results presentation] that Spain had returned to growth, and this growth has accelerated in the first half of the year,” Mr Isla said.

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