Online sales, new stores fuel Inditex revenue growth

Clothing retailer Inditex reported accelerating revenue growth after an expansion of online sales and new stores helped drive a 5 per cent profit increase last year.

Sales increased 13 percent in the six weeks through March 14th, the Arteixo, Spain-based owner of the Zara and Massimo Dutti chains said Wednesday in a regulatory filing. That gain implies like-for-like store sales growth of 6 per cent, better than the 5 per cent increase in the year ended January 31st, according to Anne Critchlow, an analyst at Societe Generale SA. The first-quarter sales performance “is a beat versus existing consensus forecasts at around 4 per cent, suggesting good support to date for full-year estimates,” Ms Critchlow said in a note to clients.

Inditex is battling fast-fashion competitors like Hennes and Mauritz, and Associated British Foods’s Primark by entering new markets and boosting online sales. The falling euro has also helped, as the retailer’s costs are highly euro- focused.

Like-for-like sales rose 5 per cent last year.

After boosting its number of stores by about 5 per cent to 6,683 through January, Inditex said it plans to open as many as 480 outlets this year, including three in New York. It also plans to start online sales in Hong Kong, Macau and Taiwan.

In January, the company acquired a 4,400 sq m building in New York’s SoHo neighborhood, continuing a strategy of building large stores in the top shopping areas in some of the world’s biggest cities, such as Milan, where the retailer operates in the Corso Vittorio Emanuele shopping district.

Inditex generates more than one-third of its revenue from stores outside of Europe.

Net income climbed to €2.5 billion in the 12 months through January from €2.38 billion a year earlier, the company said. Analysts surveyed by Bloomberg had estimated profit of €2.49 billion.

The company proposed a 0.52 euro-per-share dividend payment, 7.5 per cent more than the previous year. Inditex also unveiled a profit sharing plan for about 70,000 employees that will distribute 10 per cent of its annual earnings growth, as much as 2 per cent of total profit.

Bloomberg