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Zara Owner's Margin Shrinks to Eight-Year Low on Currencies

  • Higher garment costs, rising competition squeeze profitability
  • Shares pare decline as CEO says margin won’t drop further
Updated on

Inditex SA’s profitability shrank to an eight-year low as the world’s largest clothing retailer was confronted with adverse currency swings, higher garment costs and increasing competition.

The gross margin narrowed to 57 percent from 57.8 percent in the 12 months through January due to unfavorable currency shifts, Arteixo, Spain-based Inditex said Wednesday. That was short of the retailer’s goal of keeping the measure within 0.5 percentage points of the previous year. The shares erased part of a 2.7 percent decline after Chief Executive Officer Pablo Isla said at current exchange rates, the gross margin won’t fall this year.