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 Inditex, whose brands also include upmarket Massimo Dutti and teen
label Stradivarius, said sales rose 11 percent in local currencies
between Feb. 1 and June 8, accelerating from the 8 percent it
recorded in the year to Jan. 31.
While net profit fell 7.3 percent to 406 million euros ($553
million), the biggest decline in five years due to the strength of
the euro, that still beat analysts' average forecast thanks to
better-than-expected cost control.
Inditex is benefiting from the start of a recovery in its home
market Spain where it still makes about one fifth of sales. Spanish
retail sales rose 0.7 percent year-on-year in April, the first
increase in three months.
Sweden's H&M said sales rose 19 percent in May, its fastest growth
in six months and easily beating analyst forecasts. However, H&M
said the figures were boosted about 3-4 percentage points by
calendar effects, which would be reversed in June.
H&M said there was one extra Saturday shopping day this May than
last year and fewer holidays when stores were closed in some
countries, such as its top market Germany.
H&M and Inditex have outperformed the wider clothing market in
recent years, helped by their focus on fast-changing fashions and
low prices, with the Spanish firm having the edge thanks in part to
its greater presence in developing economies.
H&M and Inditex shares were both up over 1 percent at 1000 GMT,
within a European retail sector down 0.3 percent.
"Inditex continues to deliver strong operational performance," said
Bernstein analyst Jamie Merriman. "We continue to believe Inditex
has the best business model in apparel retail, and that there is a
significant opportunity for space opening for Inditex ahead."
FOREX HIT SEEN WANING
Inditex's first-quarter sales rose 4.3 percent to 3.75 billion
euros.
While its gross profit margin slipped to 58.9 percent from 59.6
percent a year ago, that still beat forecasts as operating expenses
rose less quickly than expected, and was well ahead of the 54.9
percent H&M posted for the three months ended Feb. 28.
Inditex Chief Executive Pablo Isla told a conference call for
analysts that he expected a stable gross margin for 2014.
The Spanish firm said it would launch online sales in South Korea
and Mexico in September in addition to the 25 markets where it
already has an e-commerce presence, and would start a store in
China's Tmall online marketplace in the autumn/winter season.
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Chief Financial Officer Ignacio Fernandez said he expected negative
currency effects to lessen considerably towards the end of the year
if foreign exchange rates continue at current levels.
Over a third of Inditex's sales are made outside Europe and
currencies such as the Japanese yen, Turkish lira and Russian rouble
have lost between 14 and 21 percent against the euro in the last
year.
The translation effect in the first quarter was particularly
significant for Inditex in markets such as Russia where the retailer
has more than 386 stores and where it charges higher prices than
home market Spain.
Zara saves on the expense of traditional advertising, relying on
free media coverage of celebrities wearing its clothes, such as the
Spanish queen-to-be Princess Letizia.
The retailer founded by Spain's richest man Amancio Ortega said it
would propose a 5-for-1 share split at its annual meeting, a move
often taken by companies when their share price is very high.
Shareholders will receive five shares for every share they own at
the close of business on July 25. The new shares will begin trading
on July 28.
Inditex shares first hit the 100 euro mark around 18 months ago and
have been at or around this level since then, reaching a record high
of 121.8 euros at the end of October.
(Additional reporting by Mia Shanley in Stockholm; Editing by Erica
Billingham and Mark Potter)
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