Inditex profits climb after strong Zara performance

Zara bucks trend of retail sector with high sales
Inditex (BME:ITX) profits climbed 18 percent in the first quarter of 2017, with its Zara brand continuing lead global growth.
The Spanish retail company reported a profit of 654 million euros for the three months to 30 April, with sales up 14 percent to 5.5 billion euros.
Moreover, strong growth in its online business also helped propel sales during the quarter. Across the period,  Zara began selling online to Malaysia, Thailand, Singapore and Vietnam, with additional plans to include India.
Whilst Inditex also operates under the brands Massimmo Dutti, Berskha and Pull and Bear, Zara contributes two thirds of group sales.
In addition, the group noted that strong sales growth had continued into the start of the second quarter, with a 12 percent growth in sales from February 1st to June 3rd.
Inditex said its gross margin had bettered slightly, from 58.1 percent in the first quarter of 2016 to 58.2 percent this year.
This follows an equally promising set of results for 2016, which saw the clothing company enjoy record sales of 13 percent.
Societe Generale analyst Anne Critchlow commented on the results:
“With currency impacts looking broadly neutral for the remainder of the year both in terms of translation and transaction, we see a year of good EBIT growth and margin increase at Inditex.”
By comparison, high-street competitor H&M (STO:HM-B) reported a 3 percent drop in first-quarter net profit in March, following lower-than-expected sales growth and various markdowns across the period.
Inditex’s strong development of its brand’s online presence has been credited as allowing the brand to buck the retail trend, and avoid feeling the effects of the marked drop in foot-fall in recent years.
According to the British Retail Consortium, poor weather and “shopper restraint” caused shopper numbers to drop 1 percent year-on-year in May, which marked the first decline in footfall since February.
As of currently, Inditex operates in excess of 7,200 stores and has a presence across 92 markets globally. Its strongest brand, Zara, has around 2,213 locations, and continues to expand.
Shares in Inditex are currently trading down 1.69 percent as of 10.24 AM (GMT).