Inditex Nine-Month Net Profit Rises on Sales Growth -- Update

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By Jeannette Neumann and Alberto Delclaux 
 

MADRID--Inditex SA (ITX.MC) said Wednesday that the winter sales season got off to a more robust start than anticipated, offsetting a slight slowdown in autumn sales that had been triggered by an unseasonably warm October.

The world's largest fashion retailer by revenue said net profit for the nine-month period ending Oct. 31 rose 6% from a year earlier to 2.34 billion euros ($2.75 billion). Sales climbed 10% to EUR17.96 billion. Both figures are roughly in line with analysts' expectations, according to a poll by data provider FactSet.

The rise in sales picked up the pace in the first six weeks of the fourth quarter, increasing 13% in local currencies from Nov. 1 to Dec. 11.

Inditex has eight brands, including Zara, Massimo Dutti and Bershka.

The jump in sales implies an increase of around 7% in like-for-like sales growth compared with a year earlier, according to Macquarie Group analyst Andreas Inderst. That is an acceleration from the 4% like-for-like sales growth at Inditex in its fiscal third quarter. An unseasonably warm October in many European capitals diminished demand for some of Zara's fall items in the first part of Inditex's fiscal third quarter. Weather conditions have since turned colder.

Analysts expect retailer Hennes & Mauritz, by comparison, to report a decline in sales in stores that have been open for more than a year.

Inditex's gross margin, a measure of profitability, fell to 57.4% in the nine months through Oct. 31 from 57.9% in the year-ago period.

Shares in Inditex have fallen 5% since the beginning of the year on investor concerns about the slight dip in profitability, which has been driven down in part by a strengthening euro.

The company generates more than half of its sales in more than five dozen non-euro currencies, so the weakening of those currencies in comparison to the euro chips away at reported revenue in euros.

Inditex feels the pain--or the gain--from currencies shifts more than many other retailers because a majority of its sales are in non-euro countries, but it has a high cost base in euros since its various brand headquarters and logistics facilities are in Spain.

Inditex shares, however, have fallen less than most peers year-to-date.

In the nine months through Oct. 31, Inditex opened 212 new stores, nearly half of them in its fiscal third quarter. That brings the total number of stores to 7,504 in 94 markets versus 7,240 at the end of October 2016.

Inditex also continues to expand its online platforms. Zara's online platform in India, for instance, launched in October, which gives the brand an online presence in 45 markets.

Write to Jeannette Neumann at [e-mail] and Alberto Delclaux at [e-mail]

(END) Dow Jones Newswires

December 13, 2017 02:46 ET (07:46 GMT)

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