Clothing retailer lifted by expansion plan
The owner of clothing retailer Zara today posted a 25% jump in profits after a year of intensive global expansion.
Spanish firm Inditex banked full year net profits of €1bn after it opened 439 stores in the year to January 31.
The company said it invested a total of €1.03bn on its growth programme as it moved to raise its international presence.
The expansion took the total number of group stores to 3,131, while the group’s entry into Serbia, Tunisia and China last year means that it now operates in 64 countries worldwide.
It has five stores in the Republic.
Looking ahead, Inditex said it would continue to build on its European and Asia-Pacific presence, with between 440 and 520 stores planned for 2007. It said capital expenditure would be between €850m and €950m.
The group, which also owns the Massimo Dutti and Bershka chains, said that sales rose by 22% to €8.2bn, with sales in Europe overtaking Spanish sales for the first time. International sales accounted for 60% of total group sales.
The company also managed to maintain its gross margin – a measure of profitability – at 56.2% during the period. The firm does not provide any further breakdown of its results.
Last year, Inditex overtook Swedish fashion retailer Hennes & Mauritz (H&M) as Europe’s largest clothing retailer. It works on a “fast fashion” ethos, where designs are swiftly replicated from the catwalks and brought to stores at affordable prices.
Clothes are produced in a limited number and new ranges introduced frequently to ensure shoppers do not get bored with what is on offer.
Analysts said the results were broadly in line with expectations, with sales and earnings slightly ahead of forecasts.
However, they pointed to concerns regarding the current high eurozone interest rates which are likely to have a marked effect on Spanish consumer spending, where Inditex still achieves 40% of sales.
William Hobbs at Barclays Wealth said: “The stock may look vulnerable if the Spanish consumer starts to slow.”
Inditex – which stands for Industria de Diseno Textil – also announced that it will present its Environmental Strategic Plan to foster its energy saving policy for the use of renewable energies and emissions reductions in July.
