Zara Parent Inditex Beats Rivals With 18% First-Quarter Profit Rise -- Update

By Jeannette Neumann Features Dow Jones Newswires

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MADRID--Zara owner Inditex SA (ITX.MC) Wednesday said stronger sales lifted profit in the first quarter, distancing it further from struggling rivals.

The world's largest fashion retailer by revenue said its first-quarter net profit rose 18% from a year earlier to 654 million euros ($733.3 million). Sales climbed 14% to EUR5.57 billion.

The figure was roughly in line with estimates by analysts, who expected the Spanish firm to report a first-quarter net profit of EUR655 million and sales of EUR5.54 billion, according to data provider FactSet.

Inditex, whose full name is Industria de Diseno Textil SA, said sales in stores and online in constant currency terms increased 12% during the first quarter and through the first five weeks of the second quarter.

Societe Generale analyst Anne Critchlow said this means that sales in constant currency terms were up 10.8% in the five weeks to June 3, implying a 4.8% to 5.8% increase in like-for-like sales at the start of the second quarter. Like-for-like sales up were 9% during the same period a year ago, she noted.

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Inditex said its efforts to integrate physical and online stores, without hurting either business, are working. About a third of online deliveries are made in Zara stores--generating savings on shipping--and many customers use stores to return online purchases.

The retailer said it launched Zara online in Singapore, Malaysia, Thailand and Vietnam during the first quarter. Zara will launch online in India in the fall.

The company doesn't break down online and store sales, but Ms. Critchlow estimates online sales account for about 7% of total sales, a figure that is expected to grow steadily. The company has slowed the expansion of physical retail areas, focusing on larger and well-located spaces that it calls flagship stores, and letting its websites do the job of smaller shops.

In the first quarter, it opened 93 new stores, primarily for its Zara and Stradivarius brands, bringing its total to 7,385 stores compared with 7,085 stores a year ago.

Write to Jeannette Neumann at jeannette.neumann@wsj.com

(END) Dow Jones Newswires

June 14, 2017 02:46 ET (06:46 GMT)