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Zara owner Inditex sees Q1 sales rise 11%

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Fashion retail group Inditex has reported an 11 per cent year-on-year increase in net sales for the first quarter of its financial year.

Trading for the group, which owns Zara, grew to €2.96 billion (£2.6 billion) for the period between February 1st and April 30th, while net income was ten per cent higher than the same quarter in 2010 at €330 million.

Aggressive store growth worldwide, which saw 110 outlets open during its Q1, including the group’s first Australian venture, helped gross profit rise nine per cent to €1.74 billion but resulted in gross margin falling to 58.8 per cent of sales.

Inditex also owns fashion brands Pull and Bear, Massimo Dutti, Bershka, Stradivarius, Oysho and Uterqüe, and there are plans to launch e-commerce operations for these businesses in selected European markets from September 6th 2011.

Zara will establish a transactional website in the US later this year, following on from the successful launch of such services in the UK and Europe last summer.

Meanwhile rival mid-market fashion retailer H&M reported its second quarter results yesterday, but its performance was not as impressive as Inditex’s.

Like-for-like (LFL) sales for the period between March 1st and May 31st increased two per cent year-on-year, while sales in local currencies were up 12 per cent compared to Q2 in 2010.

For May alone total sales were also up 12 per cent and LFL trading grew two per cent, which Espirito Santo Investment Bank analysts described as weaker than expected.

“This deterioration in the two-year LFL sales growth is alarming, particularly as we start to annualise the difficult comps from 2010 (comps move from minus four per cent to +nine per cent in June and +14 per cent in August),” they explained.

“We forecast a ten per cent fall in earnings per share in the 2011 financial year and mediocre growth thereafter.”

Karl-Johan Persson, Managing Director of H&M, said: “As a result of the sharp appreciation of the Swedish krona, sales in the second quarter converted into SEK amounted to SEK 32.4 billion (£3.09 billion) including VAT, an increase of three per cent.”

Like Inditex, H&M has added significantly to its property portfolio in recent months, with the number of stores growing by 235 since the end of May 2010.

Published on Thursday 16 June by Editorial Assistant

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