Zara Parent Lifted by Weak Euro -- Update

By Christopher Bjork 

By Christopher Bjork

MADRID-- Industria de Diseño Textil SA said Wednesday that net profit surged 28% in the first quarter, as the fast-fashion pioneer behind the Zara chain posted growth in stores on five continents, getting an additional uplift from a weakening euro.

The Arteixo, northwestern Spain-based retailer said net profit was EUR521 million ($577.97 million) between Feb. 1 and April. 30, compared with EUR406 million a year earlier. Sales grew 17% to EUR4.37 billion.

The results were ahead of market expectations. Analysts polled by FactSet had expected net profit of EUR509 million and sales of EUR4.33 billion. "A cracking start to the year," said Sanford C. Bernstein analysts.

Marcos López, Inditex's capital markets director, said the results reflected "a very strong operating performance with positive like-for-like sales growth in all geographies."

For the first time in two years, the world's largest fashion retailer by sales received a boost from the weakening euro compared with other currencies. That helped further propel sales and profit growth. Bernstein estimated that the impact of stronger currencies outside the eurozone added 3.7 percentage points to sales. By contrast, currency effects had subtracted 7% from sales in the quarter a year earlier.

Inditex said sales in stores and online in constant currencies grew 13.5% between Feb. 1 and June 7, compared with growth of 11% in 2014. Société Générale analyst Anne Critchlow said this implies that like-for-like sales were growing 6.5% in the first six weeks of the second quarter.

Inditex opened 63 new stores during the quarter, 10 more than a year earlier. It had 6,746 stores as of April 30. Almost a third of the openings were Zara Home stores, the company's home furnishing concept.

The apparel maker plans to open online stores in Taiwan, Hong Kong and Macao this year, taking its online presence to 30 countries.

Write to Christopher Bjork at [e-mail]

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