PARIS — Spanish retail giant Inditex reassured markets about prospects for the all-important year-end period as it reported a 6 percent rise in profit in first nine months, propelled by international and online expansion.
Net profit for the first nine months totaled 2.3 billion euros, while sales rose 10 percent to 17.96 billion euros, the Zara owner said. It did not provide quarterly figures.
The company recently launched its online sales platform in India and brought seven brands, including Massimo Dutti, Oysho and Zara Home, to Belarus in August.
From Nov. 1 to Dec. 11, sales in stores and online increased at a brisk 15 percent in local currencies, the company said.
“We think this statement should reassure investors,” said RBC analyst Richard Chamberlain in a research note.
Sales growth on a like-for-like basis should “remain healthy, in our view, driven by a strong fashion offer, competitive pricing and e-commerce initiatives,” Chamberlain added.
“The company’s trading update confirms a strong rebound in November sales,” said Cedric Lecasble, research analyst with Raymond James, in a note on Wednesday. Earlier this month, Lecasble lowered earnings per share forecasts for Inditex for 2018 and 2019 by 1 to 2 percent, citing the strengthening euro compared to other currencies and said Inditex likely suffered from tough trading conditions and mild temperatures in the Northern Hemisphere at the end of its third quarter to October.
Lecasble, who estimates fourth-quarter sales growth at 11 percent at constant currencies, added in the research note Wednesday that cold temperatures across Europe, where the company generates the bulk of its sales, could continue to help business through the end of the year.
Raymond James forecasts like-for-like sales growth for the company at 6 percent over 2018 to 2020, followed by 4 percent growth, calling it a “very strong performance in a highly fragmented but mature apparel market.”
Key to the company’s performance, in addition to its highly lauded supply chain, is an advanced online business, which Raymond James refers to as Inditex’s “agnostic online/off-line capabilities.”
The company plans to continue pursuing its expansion, online and internationally, Inditex chief executive officer Pablo Isla said in a conference call with analysts. Zara’s new online business in India, which was launched in October, had a “strong reception,” noted Isla.
“With this online presence, our idea is to continue developing our presence in this attractive market,” he also said about India.
Vietnam is another market where the company has been making inroads, Isla added, noting that on a recent trip to Hanoi, he could feel the “excitement” ahead of the opening of a Zara store there.
“We are in a unique position as we enjoy a global platform that fully integrates the stores and online as the best way to respond to the demands of our customers. We continue developing new initiatives in a fully integrated way,” Isla said, noting Zara’s online presence stretches across Europe, Asia and the Americas.
“We manage a diversified sales platform in 94 markets. The current base offers huge growth potential for the coming years,” he added.
Some analysts in recent months have favored Inditex over its rival H&M, which Barclays downgraded to underweight in November, saying sales growth at the Swedish retailer was mostly coming from opening new stores. RCC Capital Markets in a note earlier this month flagged the “challenging” nature of store and online integration at H&M.