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Zara Owner Posts Strong Profit Growth

Inditex reported a net profit of €1.17 billion ($1.3 billion) for the third quarter and forecasts full-year sales growth of up to 6 percent.
Zara store | Source: Shutterstock
By
  • Reuters

MADRID, Spain — Inditex, owner of fashion chain Zara, shrugged off malaise affecting the broader apparel sector to post strong profit growth on Wednesday and forecast full-year same-store sales of up to 6 percent.

At a time when fashion retailers are struggling to adapt to changing shopping habits, Inditex has benefited from its ability to quickly deliver small batches of the latest designs to consumers due to its fast and flexible sourcing arrangements.

The Spanish retail giant reported a net profit of €1.17 billion ($1.3 billion) for the third quarter — slightly above analysts' expectations and up 14 percent from the year-ago period. Revenue for the quarter was €7 billion.

The company said it had tightly controlled operating expenses even as it enlarged and improved stores like the flagship Zara in The Dubai Mall in the United Arab Emirates.

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Inditex said the low inventory and strong sales seen in the financial period was thanks to its business model of tight control of products throughout the supply chain and quick response to trends due to short design-to-production times.

"Our very low level of inventory allows us to have low levels of commitment at any given time and we continue to make decisions during the season," Chairman Pablo Isla told analysts on a conference call.

Shares, which had risen 28 percent in the year to date, traded slightly higher near year-highs of €29 per share.

In a sign of how some fashion retailers are failing to keep track of their inventory, British label Ted Baker said last week it had overstated the value of its inventory by as much as £25 million.

Inditex's arch rival, Sweden's H&M, has also battled with growing inventories due to slowing sales.

Inditex, whose flagship chain Zara has recently collaborated with perfume maker Jo Malone to make fragrances for the brand, said its cash position increased by 17 percent during the period thanks to a strong operating performance.

Ordinary capital expenditure for the full year will be approximately €1.4 billion, driven mainly by the addition of new space in prime locations during the year, it said.

Though Inditex often eschewed partnerships with high-profile celebrities, Chairman Isla said on Wednesday the collaboration between its youth-oriented Bershka brand and singer-songwriter Billie Eilish had been particularly successful.

By Clara-Laeila Laudette; editors: Sonya Dowsett, Mark Potter and Alexandra Hudson.

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