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Inditex Group, the Spanish retailer that owns the fast-fashion Zara chain, on Monday said aggressive openings in Asia and Russia drove profits up 25 percent last year and that sales remained robust in February and March.
The Spanish firm said net income in the 12 months through Jan. 31 reached 1.25 billion euros, or $1.73 billion, ahead of analysts’ estimates.
Sales in the period grew 15 percent to 9.44 billion euros, or $13.02 billion, as Inditex aggressively opened 560 stores and ramped up its business in Eastern Europe and Asia. Currency conversions were made at average exchange rates for the period to which they refer.
“The results suggest Inditex is balancing a slower Spanish market with good growth and currency gains outside of Spain,” said Fraser Ramzan, retail analyst with Lehman Brothers, in a report.
Inditex said sales from Feb. 1 to March 23 increased 17 percent in local currencies, pointing to continued health among key fast-fashion players in a tightening consumer market. Last week, rival cheap-chic chain Hennes & Mauritz of Sweden said its first-quarter profits gained 28 percent and that sales showed no signs of stress from the economy.
Pablo Isla, Inditex deputy chairman and chief executive officer, said like-for-like sales last year gained 5 percent.
Inditex this fall plans to launch a new accessories format called Uterqüe, and as many as 30 Uterqüe stores will open this year, Isla said.
“There is strong expansion potential in this highly fragmented [accessories] market,” he said.
Inditex has long followed a multiformat strategy. Besides Zara, which accounts for two-thirds of sales, Inditex operates Pull & Bear, Massimo Dutti, Bershka, Stradivarius, Oysho and Zara Home, which it introduced five years ago.
H&M recently adopted a multiformat approach, too, by launching the more upscale COS chain last year and by this year acquiring the Swedish company that runs brands including Cheap Monday jeans. H&M is also angling to introduce a chain of home stores.
Isla said Inditex will continue aggressive expansion. He said 942 million euros, or $1.49 billion, were earmarked to open as many as 640 stores this year, including Zara’s first stores in South Korea, Egypt, Ukraine and Montenegro.
This story first appeared in the April 1, 2008 issue of WWD. Subscribe Today.
Meanwhile, 80 new stores are planned for Russia, mostly in and around Moscow and St. Petersburg. But Isla said stores also will open in regional Russian capitals such as Samara and Krasnodar.
Inditex should achieve like-for-like sales growth of 4 percent this year as the company balances slower growth in Spain, where consumer spending is hamstrung by a turndown in the housing market, with other faster growing markets, he said.
Zara continued to be Inditex’s cash cow, with net sales accelerating 13 percent to 6.26 billion euros, or $8.64 billion.
Sales at the teen-oriented Bershka chain grew 16 percent to 925 million euros, or $1.28 billion, while sales at the more mature Massimo Dutti brand advanced 13 percent to 696 million euros, or $960.5 million.
Pull & Bear sales grew 18 percent to 614 million euros, or $847.3 million; sales at the Stradivarius chain climbed 22 percent to 521 million euros, or $718.9 million, and revenues at the Oysho lingerie chain leapt 30 percent to 213 million euros, or $293.9 million. Zara Home’s sales jumped 45 percent to 201 million euros, or $277.4 million.