PARIS — Profits at Spain’s Inditex SA climbed 4.3 percent in the third quarter as the fast-fashion giant pushed deeper into Asia with its flagship Zara banner.
This story first appeared in the December 11, 2009 issue of WWD. Subscribe Today.
“We have significant expansion plans for the market,” Inditex’s chief executive officer Pablo Isla said on a conference call Tuesday, noting that half of all future Zara stores are destined for Asia, underscoring the region’s strategic importance to the group.
Inditex, which also owns the Massimo Dutti, Bershka and Pull and Bear chains, said it opened 90 stores in Asia in the first nine months of the year, including Zara flagships in Tokyo’s Shibuya district and on Beijing’s bustling pedestrian corridor, Wangfujing Street. Japan already counts 50 Zara stores, while China has more than 60.
Inditex operates 4,530 stores in 73 countries, and has added 266 locations since the beginning of the year.
Net income in the three months ended Oct. 31 totaled 456 million euros, or $663 million, from 437 million euros, or $635.4 million, a year ago, based on calculations made on the nine-month results published. Dollar figures are converted at average exchange rates for the periods to which they refer.
Sales in the quarter rose 3.8 percent to 2.9 billion euros, or $4.21 billion, from 2.79 billion euros, or $4.06 billion, as Europe’s biggest fashion retailer capitalized on robust growth in China, Japan and South Korea.
Sales in local currencies rose 9 percent between Aug. 1 and Dec. 6, roughly in line with the pace in the first half.
For the nine months, net income slipped 1.2 percent to 831 million euros, or $1.15 billion, from 843 million euros, or $1.17 billion, as sales grew 5.5 percent to 7.76 billion euros, or $10.73 billion, from 7.35 billion euros, or $10.17 billion, a year earlier.
Gross margin — a key profitability indicator — slipped to 57.1 percent from 57.6 percent, but Inditex said it would likely post “stable” gross margins for the full year when it announces results on March 17.
During the call, capital market director Marcos Lopez noted that “fashionable products” are selling best. “Product with a lower fashion component is more difficult to sell in the current environment,” he said.
Asked about the company’s home market, which accounts for about a third of sales, Lopez cited “no further deterioration in the Spanish market” and asserted that Inditex is outperforming what “official figures” suggest about consumer confidence.
The company reiterated its target of better like-for-like sales growth in the second half than the first, and said it was on track to launch online selling next year.
In September, the Arteixo, Spain-based company said Zara would offer online sales starting with the fall-winter 2010 season, initially in Spain, France, Germany, the U.K., Italy and Portugal, with a progressive rollout expected in all other markets.
The retail giant said Tuesday it would likely log square footage growth of 10 percent this year, and pursue a similar pace in 2010 as it enters India in a joint venture with the Tata Group.