MADRID, Spain — Inditex SA reported a better gross margin and maintained its sales forecast for this year, quelling analysts’ concerns that the goal may be too challenging.
The gross margin widened 60 basis points to 59.5 percent. The company maintained its forecast for 4 percent to 6 percent like-for-like growth this year.
Sales missed analysts’ estimates as the company finds it more challenging to keep outperforming rivals like Gap Inc. The respite is that growth bounced back in the start of the second quarter, so investors may take the Zara owner’s word that the slowdown at the end of its first quarter was just due to poor weather.
Improvement in the gross margin will be taken well, continuing the trend seen last fiscal year. That’s after profitability gradually inched downward in the prior five years amid competition from rivals such as Hennes & Mauritz AB. Analysts said that Inditex’s operating profit is less pleasing than it looks because the estimates hadn’t factored in changes in accounting standards on leases.
These are probably the last results to be announced by Chief Executive Pablo Isla. Carlos Crespo is set to replace him after the company’s annual meeting with shareholders next month.
The stock has risen 13 percent this year.
By Thomas Mulier; editors: Eric Pfanner and John J. Edwards III.