Sep 21, 2016
Inditex outperforms rivals in first half, profit up 8%
Sep 21, 2016
Inditex, the world's biggest clothing retailer, said on Wednesday its first half net profit rose 8 percent from a year ago, beating analysts' estimate and driven by strong sales as it focuses on flagship stores and its online business.
Inditex's solid earnings set it apart from European peers such as H&M and Next, which blamed unseasonable weather for below-forecast figures last week and have consistently lagged behind their Spanish rival.
Led by its mid-market chain Zara, Inditex has shifted its focus to larger stores in prime locations and online sales, with its highly automated production process allowing it to quickly respond to changing trends and weather.
Sales of items such as floral dresses and tops, jumpsuits and over-sized sweaters from its flagship brand, Zara, helped push total sales up 13 percent at constant exchange rates in the first weeks of the third quarter from Aug. 1 to Sept. 18, the company said.
About half of Inditex's sales is recorded in foreign currencies, making the company susceptible to fluctuations of the euro against a basket of 38 currencies.
Inditex's net profit was 1.26 billion euros ($1.40 billion), in the six months ended July 31, just above analysts' average estimate of 1.25 billion euros, according to a Reuters poll. Sales rose 11 percent in the period from a year earlier.
Earnings before interest, tax, depreciation and amortisation (EBITDA) rose 7 percent to 2.11 billion euros, for the six months from February to July, slightly ahead of analysts' forecast of 2.10 billion euros.
Inditex's financial year runs from the beginning of February to the end of January.
Inditex is known for its fast turnover which allows its brands to react to trends immediately, reducing in-store markdowns and boosting profitability.
Unlike other brands that mostly source products from eastern Asia, Inditex keeps its manufacturing bases close to its distribution centre in Spain.
$1 = 0.8985 euros
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