WWD.com/business-news/financial/inditex-net-climbs-217-in-q3-6535860/
government-trade
government-trade

Inditex Net Up 21.7% in Quarter

The parent of brands including Zara and Massimo Dutti continues to expand, with capital expenditure in 2012-13 hitting one billion euros, or $1.3 billion.

A Zara store in Beijing.

LONDON — Business is booming at Inditex, parent of brands including Zara and Massimo Dutti, and the company continues to expand, with capital expenditure in 2012-13 hitting one billion euros, or $1.3 billion.

This story first appeared in the December 13, 2012 issue of WWD.  Subscribe Today.

On Wednesday, Inditex said net income climbed 21.7 percent to 712 million euros, or $918.5 million, in the three months to Oct. 31. Sales in the period advanced 17.8 percent to 4.12 billion, or $5.31 billion, the company said.

Figures have been converted at average exchange rates for the periods to which they refer.

In a report called “Inditex: Play It Again, Sam,” Bernstein Research called the results “strong,” and said it remained confident about the fashion retailer’s “near and medium-term prospects,” although currency fluctuations could dent revenue growth in the fourth quarter.

In the first nine months to Oct. 31, net income was up 27.1 percent to 1.66 billion euros, or $2.14 billion, while sales climbed 17 percent to 11.36 billion euros, or $14.65 billion, the Spanish company reported.

In constant currency terms, sales rose 15 percent in the nine months to Oct. 31. The momentum continues: Store sales in constant currency terms also rose by 15 percent between Aug. 1 and Dec. 9.

Earnings before interest and taxes climbed 30.1 percent to 2.19 billion euros, or $2.83 billion in the nine-month period.

Bernstein said that an uptick in gross margin to 60.5 percent was a reflection of Inditex’s shift away from lower price point countries such as Spain and Portugal to higher price point ones such as China, and also mirrored a shift toward higher-price fashion within countries worldwide.

RELATED CONTENT: See More Earnings Coverage Here >>

In the first nine months, Inditex added 360 stores in 54 markets, bringing the total number of stores worldwide to 5,887 in 86 markets. The company opened its first stores in Armenia and the former Yugoslavian Republic of Macedonia.

In the current quarter, on Dec. 5, Inditex opened a Zara flagship at 460-490 Oxford Street in London.

The new store sits over three floors and occupies 16,200 square feet of retail space at Park House, across the street from Marks & Spencer at the western end of Oxford Street.

Designed by Elsa Urquijo Architects, the store is laid out so that shoppers can move through the space intuitively. They are guided through intimate, cubelike structures that are dedicated to specific trends, with new items arriving twice a week. The delivery cycle ensures that the store is completely refreshed every 15 days.

During the nine-month period,  the Massimo Dutti brand made its North American debut, with the opening of a unit in Toronto in September, and one on Fifth Avenue in Manhattan in October. A second U.S. store opened in Washington, D.C., Dec. 4.

After the launch of the Zara online sales in China in September, the brand said it plans to open an online store in Canada during the 2013 spring season, and the chairman and chief executive officer Pablo Isla said during a conference call Wednesday that Zara would continue to expand online until it has a global presence.

“The results for the interim nine months 2012 show that Inditex continues its ongoing, global multiconcept growth and a strong execution of the business model…Our operations have also shown high-efficiency, and tight operating control over the period…Let me also tell you that in terms of expansion, our store opening plan and online sales rollout for the year is on track…We continue to see significant growth opportunities for Inditex globally.”

Issa added, “We continue to identify significant opportunities globally. We are expanding our business in a number of markets with attractive, long-term returns through our multiconcept and multichannel strategy…We plan to roll out online sales in other selected markets [in addition to Zara in Canada] in the near future until we establish a global presence…The current [sales and retail] base offers huge growth potential for the coming years. The store opening program for 2012 is on track. Ordinary capital expenditure will be around one billion euros.”

The company also said that its retail space would expand by 8 to 10 percent over the next three to five years. Three quarters of this year’s capex is earmarked for new stores, while the balance is being spent on retail refurbishments, IT, and logistics.