Inditex post record profits

Friday, 24 September 2010
Zara owner Inditex reported a 68 per cent jump in profits citing expansion and growth in like-for-like sales. Inditex, currently the world’s largest clothing retailer, said profits for the six months to the end of July were €628m ($836m), compared with €375m last year, when global demand was battered by financial turmoil, job insecurity and tight credit conditions. The result came from a 14 per cent increase in sales, to €5.5bn, including a 5 per cent improvement on a same-store basis.

Inditex also benefited from ongoing expansion, with 173 new stores opened in 37 countries. These included the company’s first Zara stores in India, in Mumbai.

By the end of the reporting period, it had three shops operating in the country and it expects to open up to another seven there over the next 12 months.

Inditex said that the “expansion of the Asian store base during the first half was very noteworthy”. This focus on the world’s fastest-growing region also helped reduce the company’s relative exposure to the domestic market, where consumer sentiment remains shaky, unemployment high and demand patchy.

The company nonetheless benefited from a surge in Spanish demand in the second quarter ahead of a rise in value added tax in July. By the end of July, Spain accounted for 28 per cent of sales, compared with 32 per cent at the same stage last year. Asia’s share, meanwhile, climbed from 12 per cent to 15 per cent.

Zara started online sales this month in six European countries and will extend the service to Austria, Ireland, the Netherlands, Belgium and Luxembourg in the second half. Online stores will begin operating in the US, South Korea and Canada next year.

Image: Zara AW10

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