Inditex First-Half Earnings Beat Estimates as Zara Owner Expands
Earnings before interest and taxes rose 10 percent to 914 million euros ($1.25 billion) in the six months ended July 31, from 830 million euros a year earlier, the Arteixo, Spain-based owner of the Zara chain said today. The average estimate of eight analysts surveyed by Bloomberg was 870 million euros.
Inditex, which introduced the Zara brand online about a year ago, is adding outlets in China and other emerging markets to tap higher growth in consumer spending, while reducing its dependence on Spain and southern Europe.
“This is our favorite retail stock in the sector, one of the few really crisis-resistant retailers out there,” said Jan Meijer, a retail analyst at ING Bank in Amsterdam. “The only negative about today’s numbers was that sales growth in August and September is slowing down.”
Revenue expressed in local currencies gained 9 percent in the Aug. 1 to Sept. 17 period compared with last year. Sales at that level gained 13 percent in the first half.
Hennes & Mauritz AB (HMB), the world’s second-largest clothing maker, last week reported August sales that beat analyst estimates, sending the shares up the most in more than a year. The Stockholm-based clothing retailer will report earnings next week.
The Spanish retailer opened 67 stores in the second quarter, fewer than the 75 outlets it opened in the same period a year earlier. Credit Agricole Cheuvreux analyst Daniel Ovin said that was lower than his estimate of 90 stores in the quarter.
Inditex, which has said it may add as many as 500 stores this year, said today that its expansion is going according to plan as it will open more stores in the second half than in the first.
Inditex shares fell 0.3 percent to 62.86 euros at 11:56 a.m. in Madrid, paring yesterday’s 2.8 percent gain. They have advanced 12 percent this year, while nearest rival H&M has slumped 12 percent.
Gross profit as a proportion of sales slipped to 58.4 percent in the first half from 59.4 percent a year earlier, Inditex said today. Inditex reiterated that this year it aims to keep half of the improvement from last year. The gross margin rose 2.2 percentage points to 59.3 percent in that period.
The clothing retailer may beat that target, said Societe Generale analyst Anne Critchlow, who said the margin reported today exceeded her estimate.
Total sales rose 12 percent to 6.2 billion euros. Inditex Chief Executive Office Pablo Isla said the company has been “having positive sales performance” in all its markets and expects “stable performance” in Spain. He spoke on a conference call with analysts today.
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