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Inditex Income Up 26% for Year

Spanish retailer Inditex, which runs Zara, said it's ramping up expansion in Asia and Europe as it reported a 26 percent gain in 2005 net income.

PARIS — Inditex, the Spanish retailer that runs the Zara fashion chain, on Wednesday said it would ramp up development in Asia and Europe while it reported 2005 net income bounded 26 percent.

Net profit for the 12 months through Jan. 31 increased to 803 million euros, or $993.1 million, from 638 million euros, or $796 million, besting analysts’ consensus expectations. Sales gained 21 percent to 6.74 billion euros, or $8.3 billion, from 5.56 billion euros, or $6.9 billion, driven by aggressive expansion in Europe.

Pablo Isla, Inditex’s deputy chairman and chief executive officer, told a conference call that sales in the first eight weeks of this year were in line with expectations. He said Inditex would invest 850 million euros to 950 million euros, or $1 billion to $1.2 billion, over the year to open 410 to 490 new stores. Dollar figures are converted at the average exchange rate.

Inditex opened 448 stores last year. Isla said like-for-like sales grew 5 percent, after 9 percent like-for-like growth the year before. “It was a satisfying year, with good results achieved in a compelling environment,” said Isla.

Retailers have struggled in Europe, beset by weak consumer spending. Fast-fashion players, including Inditex and Sweden’s Hennes & Mauritz (see related story this page), largely have outperformed the sector.

Sales at Zara, which generates more than 65 percent of Inditex revenues, grew 18 percent to 4.44 billion euros, or $5.5 billion, lifted by 129 new stores. Pretax earnings at the Zara chain gained 9 percent to 712.1 million euros, or $881 million, Isla said.

Bershka, the junior fast-fashion concept, reported sales grew 26 percent to 639.4 million euros, or $791 million, making it the second-biggest operation in the group’s stable. It opened 66 new stores, bringing its total to 368.

Inditex’s other operations also experienced double-digit sales growth: Stradivarius’ sales leapt 41 percent to 341.1 million euros, or $422 million; Massimo Dutti’s sales increased 16 percent to 533.8 million euros, or $660 million; Pull and Bear’s advanced 21 percent to 445.1 million euros, or $550.5 million; Kiddy’s Class’ gained 29 percent to 155.4 million euros, or $192.2 million; Oysho’s grew 49 percent to 107 million euros, or $132.3 million, and Zara Home’s bounded 93 percent to 78.1 million euros, or $97 million.

Isla said Inditex would continue to beef up its presence in Europe outside of Spain, which he said would become Inditex’s “domestic market” by 2010. He zeroed in on strong growth potential in Italy, France, Germany and Britain.

Asia will be targeted too. Isla announced a new joint venture Wednesday with Korea’s Lotte Group to open a Zara store in Seoul by yearend. Japan will get five to 10 new stores before the end of fiscal 2006. And in China, two stores will open, in Beijing and Shanghai, after the opening of Zara’s first store in Shanghai in February.

Inditex stock gained 3.4 percent to close at 31.44 euros, or $37.80 at current exchange, in trading in Madrid.