PARIS — It looks like Zara hit the sweet spot with its fall fashions. Parent Inditex SA said sales from Aug. 1 to Sept. 10 surged 16 percent in local currencies.
This story first appeared in the September 17, 2015 issue of WWD. Subscribe Today.
“We are satisfied with the start of the season in all the different geographies and all the different brands,” Pablo Isla, chairman and chief executive officer of the Spanish retail giant, told a conference call Wednesday to discuss first-half results. “Our collections have been well-received by our customers.”
While the recent trading was a touch slower than the 17 percent gain registered in the six months to July 31, when revenues totaled 9.4 billion euros, or $10.39 billion, the performance eclipsed fast-fashion rival Hennes & Mauritz AB, which posted a 1 percent sales increase in local currencies in August, a sharp deterioration from the double-digit increases the Swedish firm trumpeted in July and June. H&M blamed unseasonably warm weather in many parts of Europe for the weak figure.
Inditex reported net income surged 26 percent in its fiscal first half to 1.17 billion euros, or $1.29 billion, as the lion’s share of its fashion chains logged double-digit revenue growth. Like-for-like sales improved 7 percent.
Operating profits in the half advanced 25 percent to 1.5 billion euros, or $1.66 billion, and the gross margin stood at 58.1 percent versus 57.6 percent in the year-ago period.
Dollar figures are converted from euros using average exchange rates for the period in question.
Isla forecast a “stable” gross margin for the full year, while noting that it could be “a bit lower” in the second half due to evolution of currencies.
That said, Inditex expects a flurry of store openings in September and October. Isla reiterated the retailer would open between 320 and 380 locations for the year, while the tally of net openings came to 150 as of Sept. 15.
The Spanish parent of Zara, Massimo Dutti, Bershka and other chains said it counted 6,777 stores at July 31. The clothing retailer operates in 88 markets, and recently added online sales in Taiwan, Hong Kong and Macau. Isla declined to say how much the online channel represents, but scoffed at suggestions e-commerce might cannibalize trading in its vast store network.
In the half, 42.7 percent of revenues were generated in Europe, excluding Spain; 25.2 percent in Asia and the rest of the world; 17.4 percent in Spain; and 14.7 percent in the Americas.
The Inditex results were above consensus, and recent trading suggests “a stellar start to the quarter,” Bernstein analyst Jamie Merriman said in a research note.
“We believe Inditex will continue to deliver strong sales growth in H2 despite general emerging markets’ challenges, given their low market share and position in key markets,” the note said.
Isla trumpeted a “quite positive” trend in Spain, crediting an active program of store enlargements for fanning 6.3 percent like-for-like growth in its home market.
The executive was also bullish on China, forecasting a “significant number of openings” there. “We continue to see lots of growth opportunities in the Chinese market,” he said.