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Inditex Profits Rise 17.8 Percent

Profits rise in fourth quarter, and Inditex’s cash cow Zara chain generated 63.8 percent of overall company business last year.

Inditex SA, Europe’s largest clothing retailer and owner of the Zara brand, is bullish about its prospects after reporting a 17.8 percent spike in fourth-quarter 2009 profits. Unveiling the results Wednesday, which beat analysts’ estimates, the company also said its store sales are off to a good start this year.

Net profits in the three months ended Jan. 31 were 483 million euros, or $704.9 million, on sales of 3.32 billion euros, or $4.84 billion, which advanced 8.9 percent.

Dollar figures are calculated at current exchange rates for the period.

For the full fiscal year, Artiexo, Spain-based Inditex’s net profits gained 5 percent to 1.31 billion euros, or $1.84 billion, on sales that rose 7 percent to 11.08 billion euros, or $15.55 billion.

Pablo Isla, Inditex deputy chairman and chief executive officer, said during a press conference in Madrid Wednesday that “satisfactory” results demonstrated the “global reach of our business model,” which has led to “a widely diversified sales platform.”

Isla said “2009 has been a year of increased efficiency and tight operating control [and] as a result, we have generated a strong cash flow, which we have dedicated mainly to the expansion of the business.”

Inditex chief financial officer Ignacio Fernandez said the group saw flat like-for-like sales in 2009, which increased 3 percent in the second half.

Fernandez said he was pleased with last year’s gross margin, which made up 57.1 percent of Inditex’s sales.

Store sales in local currencies for the Feb. 1 to March 14 period increased 14 percent year-over-year.

Last year, Inditex rolled out 343 new stores, of which 98 percent were in international markets. The company operates 4,607 stores in 74 countries and noted robust growth in Asia — particularly in China, Japan and South Korea.

Outside of Spain, Europe accounted for 46 percent of Inditex’s sales, and Asia and the Americas kicked in 12 and 10 percent, respectively. Isla said sales in Spain, beset by sluggish consumer spending, declined 2 percent.

Inditex’s cash cow Zara chain generated 63.8 percent of overall company business last year. Zara’s net sales improved 7.1 percent in the period. According to Marcos López, Inditex capital markets director, the group’s “younger” chains — Bershka, Lefties, Massimo Dutti, Oysho, Pull and Bear, Stradivarius, Uterqüe and Zara Home — all contributed strong performances.

Looking forward, the company said it will open 365 to 425 stores this year, including its first location in Bulgaria, unveiled this week, and India in May. Isla said the group plans to increase its retail space between 8 and 10 percent annually through 2012.

“We have invested significantly over recent years in our infrastructure, and we have in place the capacity needed to support future growth,” said Isla, adding Inditex will focus growth in Europe and Asia.

The retail giant said it will unveil Zara’s online store concept in June, which will initially be available in France, Germany, Italy, Portugal, Spain and the U.K., to coincide with the fall fashion season. A progressive rollout is expected in all other markets.

Inditex stock closed up 3.5 percent on Wednesday to 48.54 euros, or $66.60 at current exchange.