Zara bucks the retail trend with 11 percent rise in sales

zara
Zara bucks trend of retail sector with high sales

Zara owner Inditex’s ‘fast fashion’ approach continues to keep the company ahead of competition, posting an 11 percent rise in sales on Wednesday.

Net sales rose to 16.4 billion euros compared with the same period last year, with net profit for the nine months to the end of October up 9 percent at 2.2 billion euros.

Zara’s party season outfits pushed sales up in November, going against the general trend in the sector. Velvet dresses, military blazers and mini skirts increased sales by 14.5 percent in local currency terms.

Analysts at Liberum commented on the impressive performance:

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Few other major clothing retailers can match the mid-teens [percentage] sales growth that Inditex has achieved in difficult global markets this year,” analysts at Liberum said.

“The company’s clear focus on achieving full-price sales underpins high and stable margins.”

Inditex has faster production line than other companies, having manufacturing bases close to their main distribution centre in Galicia, northern Spain. It mean products can go from design to shipping in less than a month, allowing the chain to adapt quicker to changing trends and boosting profitability.

Inditex (BME:ITX) is the owner of high street chain Zara, as well as Massimo Dutti, Pull & Bear and Bershka. The retailer has opened 227 new outlets this year, creating 9,000 jobs.
The retailer has bucked the general trend of the sector, where many chains struggled to adapt to changing consumer habits over the season. Both Abercrombie & Fitch and Gap posted falling sales last month for the Autumn/Winter season, with British retailer Marsk & Spencer looking to cut back on their clothing line as it continues to fail to attract shoppers. Zara’s biggest rival, H&M, is set to publish November sales on Thursday.
Inditex shares are currently trading down 2.65 percent at 32.08 on the Madrid market (1355GMT) as investors indicate a lukewarm reaction to the figures.