Business

Asian growth drives Zara owner Inditex 2011 profit

March 21, 2012

Workers work at the Zara factory at the headquarters of Inditex group in Arteixo, Northern Spain. — Reuters file picWorkers work at the Zara factory at the headquarters of Inditex group in Arteixo, Northern Spain. — Reuters file picMADRID, March 21 — Spanish group Inditex, the world’s leading clothes retailer, posted perky February sales figures today and announced a 12.5 per cent dividend rise as it aggressively expanded into fast-growing Asia.

The retailer has outpaced rivals during the downturn in austerity-wracked Europe, and now has more than 5,500 stores across about 80 countries. The company will launch Zara online in China this winter.

The owner of fast fashion chain Zara met expectations with a two per cent rise in full-year net profit to €1.9 billion (RM7.8 billion), with one analyst saying results in the fourth quarter were better than forecast.

“Like-for-like sales and gross margin seem healthier than expected in the final quarter. On every level of the high quality indicators, it is a beat,” Societe Generale analyst Anne Critchlow said.

Inditex poured cash flow from its operations into further expansion worldwide, opening 483 stores and debuting its Zara brand in new markets including Azerbaijan, Australia and South Africa.

Home country Spain, suffering the highest unemployment in the European Union and probably already in recession, accounted for 25 per cent of sales, down from 28 per cent last year as more of the retailer’s business came from Asia.

Inditex, started by Spain’s richest man Amancio Ortega, runs eight brands, ranging from Zara to upmarket Massimo Dutti and accessories label Uterque.

Spring sales off to good start

Inditex reported store sales in local currencies up 11 per cent from February 1 to March 14 when Zara was selling its spring range of floral print shirts, lemon tailored coats and studded ankle boots.

That implied same-store sales up three per cent, said Critchlow — a good result for a period when there was snow through most of western Europe.

Inditex plans to open between 480 and 520 new stores in 2012. By September, all the retailer’s brands had online stores.

Shares in Inditex, which is to lift its dividend to a total €1.80, reached a record high €72.15 on Monday, as investors speculated on the cash-rich Spanish group’s dividend.

The stock rose a further 0.7 per cent today to trade at €72.26 by 0818 GMT (1618 Malaysian time).

Inditex is trading at 23.3 times expected 2012 earnings, according to Reuters data, more expensive than rival H&M at 22.7 times and Gap of the United States at 14.5 times.

Inditex’s production model is seen as having shielded it from some of the worst effects of the crisis by allowing it to adapt quickly to shifting consumer behaviour and changes in labour and material costs.

As well as making clothes in Asia, where labour costs are rising from previously low levels, Inditex retains manufacturing operations in Spain — in its home region Galicia — as well as in neighbouring Portugal and Morocco. — Reuters

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