Zara owner sports runaway growth
Madrid - Inditex, the world’s largest clothing retailer, reported its fastest annual profit growth in three years fuelled by online sales and the Zara chain, which offers $19.90 flared dresses and $29.90 leather sandals.
Net income rose 15 percent to 2.88 billion euros ($3.2 billion) in the period through January, the owner of the Zara and Massimo Dutti brands said Wednesday in a statement. Analysts expected 2.9 billion euros, according to the average estimate. Revenue gained 15 percent in the start of this quarter on an adjusted basis, maintaining last year’s growth rate.
“Current trading is good news,’ said Anne Critchlow, an analyst at Societe Generale in London, who estimates that full-year same-store sales rose 8 percent to 9 percent in a period when warm winter in Europe eroded rivals’ growth. “There’s a stark contrast between Inditex and many of the other retailers we cover. Like-for-like sales growth in the second half was up 10 percent. Even under benign conditions, that would be a huge achievement."
Since its 2001 initial public offering, the retailer has boosted its sales more than sixfold through aggressive expansion of its eight chains. The Arteixo, Spain-based company said Wednesday it will spend 1.5 billion euros this year as it adds as many as 460 stores, entering markets such as Vietnam, New Zealand and Nicaragua. By the end of this year, all its brands will be available online throughout Europe and Turkey.
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The stock rose 0.7 percent to 29.61 euros as of 9:05 a.m. in Madrid.
Inditex said it also plans to absorb about 100 smaller shops into neighbouring ones this year. The retailer has changed its focus to opening fewer but larger stores. The average Zara was 558 square meters in 2015 compared with 530 square meters in 2006, according to Credit Suisse.
The Zara chain’s sales advanced 18 percent to 13.6 billion euros, while operating profit rose 16 percent to 2.5 billion euros.
Inditex is raising its total dividend 15 percent to 60 cents a share.
Inditex has been cutting prices on products to help drives sales. In the UK, Zara reduced prices on higher-end products by 17 percent and less expensive ones by 36 percent in the 18 months through November, according to Credit Suisse.