PARIS — Spain’s Inditex, the owner of the Zara retail chain, said net profits rose 10 percent in the first nine months of the fiscal year as it continued to grow its store network in emerging economies, helping to counterbalance softness in core European markets.
This story first appeared in the December 15, 2011 issue of WWD. Subscribe Today.
Europe’s largest clothing retailer posted net profits of 1.3 billion euros, or $1.84 billion, in the nine months from Feb. 1 to Oct. 31. Dollar figures are calculated at average exchange rates for the period in question.
Inditex said gross margin stood at 59.6 percent during the first nine months of the year, down from 59.9 percent in the corresponding period last year, on sales of 9.71 billion euros, or $13.7 billion, up 10 percent year-on-year.
Although Inditex did not break out data for the third quarter, the figures indicated sales slowed during the period versus the first half, as unseasonal weather and the impact of austerity measures dampened sales in Europe.
“The unseasonal weather has been a feature of the third quarter of 2011, but as weather patterns have returned to normal, so have sales,” Marcos López, capital markets director of Inditex, told analysts during a conference call.
López added that he did not expect any “significant” increase in markdowns at the end of the year. Gross margin in the second half should remain stable versus the same period in 2010, he added.
Store sales in local currencies rose by 11 percent between Nov. 1 and Dec. 11, Inditex said. “The autumn-winter season is influenced significantly by the performance over the Christmas period and after-Christmas sales due to their important sales volumes,” it added.
Based in Arteixo in northwest Spain, Inditex opened 358 stores in 45 markets in the first three quarters, bringing the total network to 5,402 stores as of Oct. 31. So far, in the fourth quarter, the company has introduced its first stores in Taiwan, South Africa and Azerbaijan, and plans to enter Georgia and Peru in the next few months.
“The current base offers huge growth potential for the coming years,” said Pablo Isla, Inditex’s chief executive officer who also took over the role of chairman from founder Amancio Ortega in July.
Inditex maintained the guidance it gave at the beginning of the year, reiterating that it planned to open between 460 and 500 stores in fiscal 2011. This includes some 130 stores in China, where it expects to end the year with more than 270 stores.
In India, Inditex expects to expand at a more modest pace of eight to 10 new stores a year.
As planned, the group launched e-commerce sales for its Pull & Bear, Massimo Dutti, Bershka, Stradivarius, Oysho and Uterqüe brands on Sept. 6 in 15 European countries. It also extended Zara’s e-commerce operations, launched last fall, to the U.S. on Sept. 7 and Japan on Oct. 20.
Shares of Inditex closed up 2.5 percent at 63.22 euros, or $88.14, having reached an intraday high of 64.64 euros, or $90.12.