• Home
  • News
  • Business
  • Euro's depreciation suits Inditex well in the first quarter

Euro's depreciation suits Inditex well in the first quarter

By Angela Gonzalez-Rodriguez

loading...

Scroll down to read more

Business |ANALYSIS

Inditex has distanced itself from other giants of the fashion world by benefiting from currency exchanges. Thus, while luxury heavyweights like LVMH or Chanel were negatively affected by exchange rate fluctuations, the owner of Zara has received an additional boost from the euro’s depreciation.

During the first three months of this fiscal year, Inditex has continued its ambitious store openings pipeline.

Additionally, the largest fashion retailer in the world has shone with greater force if possible in markets like the US or Asia, driven by higher revenues impulse by the depreciation of the European shared currency.

Part of the increase in turnover is due to currency effects

In fact, a 4 percent increase in turnover in the first quarter was due to foreign exchange impact, highlights the Spanish company.

Inditex recorded in the first quarter of its fiscal year 2015 an attributable profit of 521 million euros, which represents an increase of 28 percent over the same period last year, also above expectations (510 million euros) of analysts polled by Reuters.

Investors welcomed the news unevenly. At the trading floor, the reaction was mixed, as despite revalued by 26 percent so far this year, Inditex shares were down 1.1 percent in early trading Wednesday morning.

Greatest quarterly sales increase in two years

The Spanish fashion giant said sales in the first quarter rose 17 percent to 4.374 million euros, its biggest gain in two years. This figure also bit analysts' forecasts (4.341 million euros).

In its conference call with analysts, Inditex said the increased revenue was based on volumes rather than a rise in prices: "We have maintained stable prices in different markets," said Pablo Isla, CEO of Inditex. At constant exchange rates, revenue increased in the first three months came in at 13 percent.

Regarding the trend for the second quarter (May to July), the textile group said sales in store and online at constant exchange rates increased by 13.5 percent between February, 1 and June, 7, pointing to an acceleration from May compared to the previous three months.

Isla said it expects a moderation in the second half of the year. The president of Inditex added that the company expects a stable gross margin in 2015, saying however that it would be "a little higher in the first half and a little lower in the second half of the year."

"An increase in the confidence of European consumers related to a softer monetary policy should be a good omen" for consumption in 2015, which would benefit Inditex, according to the analysis of Barclays.

Meanwhile, Bankinter analysts pointed that "The good results have a positive impact on the value of the company. Although its price shows high values ​​do not see any problem for the action to change its uptrend. Although the revaluation of +28 percent over the year makes us think of a correction value. We continue to believe that the price of the Euro in low ranges, benefit you in your bottom line, despite having forecast a moderation in sales growth. "

Inditex