Inditex secures its pole position

Thursday, 22 September 2011
Inditex Wednesday said its net profit rose 14% in the first half, placing itself at the first position  within the quoted apparel companies. The parent company that owns Zara, Bershka and Pull & Bear as well as other five brands, said net profit for the six months to end-July rose to EUR717 million from EUR628 million a year earlier, ahead of expectations of EUR667.6 million.
 
As reported in a confrenec for investors, in the first half, Inditex continued its rapid international expansion away from its Spanish home market, opening 177 new stores, including its first Zara outlets in the Australian cities of Sydney and Melbourne. In coming months, the apparel retailer will open its first Zara stores in South Africa, Taiwan, Georgia, Azerbaijan and Peru.
 
Sales increased 12% to EUR6.21 billion as customers in 78 countries on five continents remained drawn to its fashion concepts. Same-store sales were up 6% on the year, a performance that Liberum Capital analyst Simon Irwin described as "astonishingly strong given the environment." Irwin said for Fox News the rollout of online stores in Europe is "clearly working very well," giving like-for-like sales an extra boost. The Spanish group earlier this month launched Zara online in the U.S., and will open its Japanese online store Oct 20. It also recently rolled out e-commerce for its other brands in some European countries.
 
Chairman and Chief Executive Pablo Isla said the boost to like-for-like sales wasn't just related to online launches. "The evolution of sales and the reception of collection has been very strong in many markets," he said. Isla said that the company had seen sales growth in all its main markets in the first half.
 
Across the Atlantic, during this year's holiday season, US national retail sales will increase by just 3% from last year, according to ShopperTrak, a retail trend forecaster. That is compared to last year's 4.1% year-over-year increase. The expected slowdown follows 19 consecutive months of year-over-year U.S. retail sales growth, and some retailers are just happy that they are remaining in the black.
 
“We are still recovering from the recession, and I don't think anybody anticipated 2010 or 2011 would be a smooth ride,” said Rebecca Marion Flach, the vice president of membership and communication at the Retail Council of New York State, which represents thousands of stores across the state.
 
In Wall Street, Aeropostale hit a new 52-week low Wednesday as it is currently trading at $9.85, below its previous 52-week low of $9.86 with 553,424 shares traded as of 11:10 a.m. ET. Average volume has been three million shares over the past 30 days.
 
Finally and just at the other half of the world, China's fashion apparel market, dominated by sportswear brands and local casual clothing brands, is expected to triple in size to more than 1.3 trillion yuan ($201.3 billion) in the next 10 years, Boston Consulting Group said in a report. Raising the stakes further, foreign companies are accelerating their expansion into the country's smaller cities, the traditional stronghold of local brands, with products specifically tailored to target consumers in those cities. Adding to pressure on the Chinese companies, industry experts say it's too early for any of the local retailers to be saved by a takeover or a private equity purchase. Struggling with rising costs for labour, raw materials, rent, and advertising and promotion, Li Ning and Dong Xiang posted 50 percent and 71 percent falls in first-half earnings, respectively. Shares of the two companies have plunged more than 60 percent in the past year, while shares of local rivals ANTA Sports Products Ltd, Peak Sport Products Co Ltd, Xtep International Holdings Ltd and 361 Degrees International Ltd are down 30-50 percent. Both Chinese companies are positioning themselves as serious competence for Nike and Adidas within the Asian markets.

Angela González-Rodríguez

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