Asia drives Inditex profits

Spanish fashion retailer Inditex has reported a rise in first quarter profits of 20 percent, driven by strong sales in Asia and Spain. Net income in the three months ended 30 April rose to €150 million, while gross margin soared 22 percent to 55.7 percent. The results were in line with most analysts’ expectations.

Sales gained 20 percent to €1.72 billion, thanks to the 114 new stores the company opened in the quarter, including the first Zara store in China. Deputy chairman and chief executive Pablo Isla said the Shanghai store had performed beyond expectation. “Ninety percent of shoppers are Chinese, not foreigners living in Shanghai,� Isla told WWD. “That is significant, and representative of the market’s potential.�

Inditex plans to open a second store in Shangahi later this year, as well as one in Beijing, demonstrating its commitment to expansion in Asia. Contrary to its major competitor, the Swedish chain Hennes & Mauritz, who concentrates on the European and American markets. There are also plans for stores in Japan and Zara is to open its first store in Seoul by the end of the year. Sales in the US, where the retailer operates 19 Zara stores, were “quite good�, according to Isla. He predicted continued strong sales in that market, where Zara plans to open more stores in Miami, Los Angeles and San Francisco by the end of the year. Sales in Spain had been strong and “showed no signs of deceleration�. However, sales in Germany, which Isla said is Inditex’s “most difficult market in Europe�, were poor and showed “no signs of improvement�.

Revealing that the first six weeks of the second quarter were in line with expectations, Isla said the company would spend €850 million to €950 million on the opening of 410 to 490 stores this year. Zara is Inditex’s cash cow, generating about 65 percent of group sales. Among others, the company also operates the Bershka, Massimo Dutti, Pull and Bear and Stradivarius chains.