Business World

Tuesday 20 February 2018

Zara owner's first-half profits beat forecasts

Sarah Morris and Tracy Rucinski

THE owner of clothing giants Zara and Massimo Dutti reported a surge in sales during the summer – pointing to a recovery after poor weather and weak foreign currencies weighed on profits in the first half of the year.

First-half net profit at Inditex, the world's largest clothes retailer, rose 1pc to €951m, beating an average analyst forecast of €926m on the back of strict cost controls and a lower tax rate.

The Spanish company owns eight brands, including upmarket Massimo Dutti and teen label Bershka, and counts Swedish firm H&M among its biggest global rivals.

The results were among the company's weakest after years of stellar performance but showed an improvement from the second quarter onwards.

Its shares were up 0.5pc on early trading.

Unlike rivals, Inditex gives no monthly or quarterly like-for-like sales, which compare sales at stores open more than a year, but analysts said yesterday's statement showed trading had accelerated.

Inditex has held up better than some other retailers during the global economic crisis, largely thanks to its "fast fashion" model under which it quickly produces many affordable versions of catwalk trends in small quantities, allowing it to respond quickly to consumer demand.

However, this year the company has struggled to match a particularly good 2012, which was boosted by more expensive fashion trends.

The first half was the weakest since net profit declined in 2009. Its gross margin slipped to 58.6pc of sales versus 59.6pc a year ago, showing the retailer struggled to increase its profit rate.

Irish Independent

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