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Reuters
Published
Mar 9, 2016
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Zara owner Inditex posts strong sales, to slow stores openings

By
Reuters
Published
Mar 9, 2016

Inditex, the world's biggest clothing retailer, reported strong sales growth for the first five weeks of its new financial year and the owner of the Zara chain said it would slow its rapid pace of new store openings.

Inditex, tapping into a wider industry trend of expanding online sales, will focus store openings on flagship sites in prime locations. It will aim for 6 to 8 percent growth in new sales space in coming years, below previous guidance of 8 to 10 percent.

Inditex


"We believe that Inditex has made the right choice to slow space growth," said Bernstein analyst Jamie Merriman. "We believe that Inditex is clearly able to grow market share with the less capital intensive e-commerce approach."

Inditex had opened 330 stores in 56 markets in 2015, with a new Zara shop in Hawaii becoming the group's 7,000th store worldwide. It added a Zara store in New York's trendy SoHo district last week.

Inditex, whose brands include upmarket label Massimo Dutti and teen fashion chain Bershka, expanded online sales to Hong Kong, Taiwan, Macao and Australia during the year and said it would complete its online presence in all European Union markets in April when it goes live in Slovenia.

Sales of items such as broderie anglaise blouses and floral lace dresses from fashion label Zara's spring collection helped push sales across Inditex's stable of brands up 15 percent, at constant exchange rates, in the first five weeks of the financial year that started in February.

Rival H&M saw sales rise just 7 percent in January in local currencies and warned that price reductions to shift winter wear after unusually warm weather and high purchasing costs due to a strong dollar would weigh on its first quarter.

DIVIDEND RISES

Inditex beat Societe Generale's forecast of 12 percent sales growth. Analyst Anne Critchlow said it implied sales growth, stripping out the effect of new store openings, of 8 to 9 percent. Lower prices may have fed into this performance, she said.

"We believe Inditex has been lowering prices and this is booting like-for-like sales growth at Inditex," she said.

Inditex's net profit came in at 2.88 billion euros (2 billion pounds) for the financial year which stretches from February to January, boosted by the relative weakness of the euro against a basket of around 60 currencies.

The profit was in line with the expectations of analysts polled by Reuters.

Inditex is one of the richest valued stocks in the apparel sector, trading at 28.3 times forward 12-month earnings, compared with 21.7 times for H&M, according to Reuters data.

Shares, that had fallen around 7 percent since the beginning of the year partly due to worries about a strengthening euro squeezing core profit, rose around 0.6 percent to change hands at 29.6 euros in early Wednesday trade.

The cash-rich company proposed a dividend of 0.6 euros per share, up 15.4 percent on the year-ago period.



 

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