ZCZC
BCN-17
SPAIN-EARNINGS-RETAIL-INDITEX
Inditex shares drop as Zara owner posts slower profit rise
MADRID, Dec 12, 2018 (BSS/AFP) – Inditex shares plunged more than 4.0 percent
on Wednesday after the Spanish retail giant posted slower net profit growth
during the first nine months of its fiscal year.
The company, the owner of the popular brand Zara, posted a net profit of
2.44 billion euros ($2.77 billion) in the February to October period, up 4.0
percent from 2.34 billion euros a year earlier.
The results, which represented a slowdown from the 6.0 percent increase in
the previous nine-month period, “disappointed the market”, said Sergio Avila
Luengo, an analyst with IG Markets.
“The current situation of the company is clearly technically worsening,” he
added.
Shares in Inditex fell 4.63 percent to 25.11 euros in early afternoon
trade, after being down as much as 6.0 percent. The Ibex-35 index of most
traded shares was up 1.07 percent.
The company, whose brands include Massimo Dutti, Pull&Bear, Bershka and
Oysho, said sales overall climbed 3.0 percent to 18.4 billion euros.
The company, which launched online sales for Zara in 106 new markets last
month, said the period was marked by an “extraordinarily warm September” in
Europe which slowed the start of its autumn-winter collection although sales
were strong in November.
During a conference call with analysts to discuss the results, Inditex
chairman Pablo Isla was repeatedly asked why the company did not follow the
example of rivals who slashed prices after an unusually warm September.
Isla defended the company’s decision not to follow suit, saying “Inditex’s
business model execution was satisfactory in the third quarter of 2018”.
The company reiterated its forecast for a rise in sales of 4.0-6.0 percent
during the second half of its fiscal year.
Based in Arteixo, a small town in the northwest of Spain, Inditex makes
over half of its clothes in factories close to its main markets — in Spain,
Portugal, North Africa, Turkey and Eastern Europe.
This business model allows it to get clothes to stores much faster than its
rivals, who prioritise low production costs and outsource manufacturing to
China, and it can also react more quickly to shifting consumer tastes to
avoid excess inventory.
BSS/AFP/SR/1940 HRS