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Inditex Net Jumps 63% in Quarter

Sales rose 14 percent to 2.66 billion euros, or $3.61 billion.

Spain’s Inditex SA, the owner of the Zara retail chain, boosted confidence in a rebound in consumer spending with a 63 percent jump in net profit during the first quarter.

This story first appeared in the June 10, 2010 issue of WWD.  Subscribe Today.

Europe’s largest clothing retailer posted net profits of 301 million euros, or $408 million, in the three months ending April 30, exceeding analysts’ expectations and sending the stock price up 7.5 percent to 47.19 euros, or $56.37, by the close of trading on Wednesday.

Sales totaled 2.66 billion euros, or $3.61 billion, up 14 percent versus the same period last year. Dollar figures are calculated at average exchange rates for the period in question.

The gross margin stood at 59.9 percent of sales, up from 56.9 percent in the first quarter of 2009, thanks to “inventory management, the use of sourcing proximity to respond to sales growth and a positive currency impact,” the company said.

Based in Arteixo in northwest Spain, Inditex manufactures half its products in the Eurozone, allowing it to respond rapidly to spikes in demand for high-turning products and helping to keep inventories lean.

Store sales in local currencies rose 13 percent year-over-year between Feb. 1 and June 7.

Inditex deputy chairman and chief executive officer Pablo Isla played down the possible impact of fiscal austerity measures on consumer spending in Spain, the group’s number-one market with close to a third of total sales.

“The reality in Spain is better than the perception you may have. I personally have strong confidence in the dynamism of the Spanish economy going forward,” he told analysts in a conference call.

The group opened 98 stores in 29 countries during the first quarter, bringing the total to 4,705 locations in 76 countries as of April 30.

Although Zara generates the bulk of the company’s business, Inditex is also expanding its other chains: Bershka, Lefties, Massimo Dutti, Oysho, Pull and Bear, Stradivarius, Uterqüe and Zara Home.

The latter two recently unveiled new-look stores that will be rolled out to other locations, Isla said. Meanwhile, Zara entered the Indian market in May with a first store in New Delhi, and a second location will open in Mumbai today.

“Zara’s arrival in India, the world’s second most populous country with 1.1 billion inhabitants, represents a new strategic milestone for our group,” Isla said. “Inditex is now present in all the key Asian markets.”

Zara will launch online sales on Sept. 2 in France, Germany, the United Kingdom, Spain, Italy and Portugal on all platforms including smart phones and tablet devices. More than two million people in 85 countries have already downloaded Zara’s smart phone application, Isla noted. “We have plans to roll out Zara online sales in other selected markets until we reach a global presence,” he said. “During 2011, we want to be present with our offer online in the most relevant markets in the world, and this includes the U.S. market.”