Zara

PARIS — Spanish retail giant Inditex said net profit advanced 18 percent in the first quarter of this year as the company continued its worldwide expansion.

Although the results were in line with analysts’ expectations, Inditex shares closed down 1.8 percent at 35.22 euros, or $39.50 at current exchange rates, on the Madrid Stock Exchange on Wednesday as traders questioned the retailer’s capacity to boost its margins.

The owner of Zara and Massimo Dutti posted a net profit of 645 million euros, or $708.5 million, in the three months ended April 30. Inditex’s earnings before interest, tax, depreciation and amortization, or EBITDA, rose 17 percent to 1.11 billion euros, or $1.22 billion.

Dollar figures are calculated at average exchange rates for the period to which they refer.

The world’s largest fashion retailer registered net sales of 5.57 billion euros, or $6.12 billion, in the first quarter, up 14 percent versus the same prior-year period. Sales in constant currency terms increased by 12.5 percent, Inditex reported.

Its gross margin — a key indicator of profitability — stood at 58.2 percent, up only one basis point versus the same period a year ago.

Pablo Isla, chairman and chief executive officer of Inditex, said there were no significant changes in pricing during the period. “At current exchange rates, we are not seeing a decline in gross margins for the year,” he told analysts on a conference call.

The executive maintained his upbeat outlook for the group, noting all of its brands — which also include Zara Home, Uterqüe, Oysho, Pull & Bear, Stradivarius and Bershka — expanded their integrated physical and online store presence.

“We continue to see significant growth opportunities for Inditex globally,” he said.

Zara launched online operations in Thailand, Malaysia, Singapore and Vietnam in the first quarter and is due to begin offering e-commerce in India during the second half of the year.

Key flagship openings during the period included Zara’s largest store in the world on Paseo de la Castellana in Madrid. Massimo Dutti opened a two-story flagship in Moscow, while Uterqüe unveiled a new store design in Barcelona featuring a vertical garden.

The group ended the quarter with 7,385 stores in 93 markets.

Isla noted that in its key domestic market, Inditex has enjoyed sales growth above 20 percent in last three years. “The business in Spain remains very healthy and we continue having positive like-for-like sales growth,” he reported.

Worldwide, sales in constant currency terms were up 12 percent between Feb. 1 and June 3. Inditex has consistently outperformed rival Hennes & Mauritz AB, thanks in large part to a proximity sourcing model that allows it to pick up rapidly on changing trends.

“The most relevant thing, without any doubt, is the collections, the product, the ability to react during the season, the flexibility of our business model,” Isla said.

At present, most analysts have a buy rating on the stock. In a research note on Wednesday, Barclays Bank gave it a price objective of 40 euros, or $44.86

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