Net sales for the first quarter rose by 11 per cent year on year to €2.96bn, with sales growth in local currency terms up by 11 per cent annually. Earnings before interest, taxation, depreciation and amortisation rose to €601m (€560m), but the gross sales margin shrank slightly from 59.9 per cent in the first quarter of 2010 to 58.8 per cent.
Zara’s owner reported robust growth in the first quarter as sales in emerging markets and domestic production helped it buck the rising costs hampering rivals. Inditex opened new stores at a rate of 12 a week over the quarter in 29 separate countries, taking its global total to 5,154 in 78 countries at the end of April.
The results were interpreted by some analysts as further evidence that Inditex’s production model, being the world's largest fashion chain that opened 12 stores a week in the first three months of the year and said it planned to open hundreds more as it strove to bring its "fast fashion" clothes to the world, was enabling it to avoid problems caused by high cotton prices and rising Chinese labour costs that have troubled rivals such as Hennes & Mauritz, which on Wednesday missed analyst forecasts for its monthly sales figures. Analysts said Inditex outperformed its rivals because most of its clothes are still made in Spain and north Africa rather than China, where rising labour costs are punishing other high street fashion chains.
“Inditex’s results show, once again, the ability of the company to offset all the macro uncertainties (the weakness of the Spanish economy and other European countries, the rally in the cotton prices, the pressure in the Chinese wages) thanks to its unequalled business model in the apparel retail sector,” said one Madrid-based analyst to FT.
After last year opening online stores for Zara for the first time, the retailer said that equivalents for its Massimo Dutti, Pull and Bear, Bershka and three other brands would be opening in Europe in September.
An online Zara store in the US, where Inditex this year purchased a flagship Fifth Avenue store in New York in what was the most expensive per foot US property deal on record, will also open in September. “This to us is clearly a sign that the company is pleased with the results of the initial launch and believes there is pent up demand for the products from the non-Zara banners,” said Karen Howland at Barclays Capital.