Zara owner Inditex says winter sales brisk after warm autumn

MADRID, Spain - Zara owner Inditex said sales for the start of its fourth quarter rose 14 percent as the retailer shrugged off a warm start to autumn which has hurt other European retailers.

Sales in local currencies from Nov. 1 to Dec. 8 included the start to the Christmas period but do not take into account exchange rate effects.

Sales for the nine-month period ending October rose 10.5 percent to 12.7 billion euros ($16 billion) while net profit was flat at 1.69 billion euros. Discounting negative currency effects, sales rose 7 percent.

European retailers' sales have been hit by an unusually warm autumn, crimping demand for more profitable items such as winter coats and boots. But Inditex's fast-fashion model of producing lots of small collections allows it to better respond to changing demand.

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"The strong and positive third-quarter like-for-like sales... reflects the strength of the business model and the speed with which Inditex can respond to adverse conditions like mild weather," said Bernstein analyst Jamie Merriman.

Gross margin, a closely-watched measure of profitability, shrank to 58.9 percent from 59.9 percent a year ago. The company said 40 basis points of that decline was due to a change in accounting criteria, and a similar impact was expected in gross margin for the full year.

However, its gross margin remains particularly high for the sector, along with Swedish-based H&M which has a margin of 58.8 percent.

A Reuters poll had forecast net profit of 1.67 billion euros, EBITDA of 2.8 billion euros and sales of 12.6 billion euros.

The depreciation of currencies against the euro in some of Inditex's lucrative markets like Russia and Japan, where the retailer manages to charge higher prices, has been crimping results.

Founded and controlled by billionaire Amancio Ortega with an around 59 percent stake, Inditex's brands include Bershka, Massimo Dutti and Stradivarius.

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