online sales help Inditex top forecasts

Fast-changing fashion ranges and a drive to win new customers online and in emerging markets helped Inditex, the world’s biggest clothing retailer and owner of the Zara brand, to beat first-half profit forecasts on Wednesday.

The Spanish retailer, which runs eight brands including upmarket Massimo Dutti, youth label Bershka and underwear store Oysho, said its net profit rose by a third as market share gains helped it to cope with a deep recession in its home market.

Retailers across Europe are mostly struggling as shoppers’ disposable incomes are squeezed by rising prices, muted wages growth and austerity measures.

But those able to tap into growth areas like online shopping, emerging markets and “fast fashion” – where affordable versions of new styles can be brought from the catwalk into stores in as little as a fortnight – are still able to thrive.

British online retailer ASOS also posted a surge in quarterly sales on Wednesday.

“The drivers are certainly there – the rapid rollout of online sales and fast fashion – but even so it’s a spectacular performance,” said Societe Generale analyst Anne Critchlow of Inditex’s results.

At 0745 GMT, Inditex shares were up 2.7 percent at 94.76 euros. The stock has risen 45 percent so far this year, far outperforming the European retail sector which is up 6.6 percent and a Spanish blue-chip index down 4.9 percent.

Inditex said it made a first-half net profit of 944 million euros ($1.2 billion), beating a forecast of 905 million in a Reuters poll of banks and brokerages.

Sales at stores open over a year were up 7 percent from the start of the third quarter through to Sept. 17, it added.

Hennes & Mauritz, the world’s second largest fashion retailer, said earlier this week unusually warm weather in Europe dented demand for autumn clothes and led to an unexpected drop in sales in August.

REDUCING RELIANCE ON SPAIN

With more than 5,600 stores worldwide, Inditex has reduced its reliance on its home market to 22 percent of sales from 26 percent a year ago, pushing into new markets world-wide.

The latest Spanish retail sales figures for July showed a 7.3 percent year-on-year fall, the 25th consecutive drop, and shoppers there were dealt a further blow at the beginning of this month when the government hiked value-added tax.

Inditex told analysts during a conference call it had a 12 percent market share in Spain, with half belonging to flagship chain Zara.

Founded by Spain’s richest man, Amancio Ortega, Inditex is considered to have helped invent the fast-fashion production model, which is now being widely copied in an increasingly competitive retail environment.

This month Topshop streamed fashion models live via social media direct from the catwalk, allowing shoppers to make immediate purchases.

Inditex plans to open between 480 and 520 new retail outlets this year, many of them in the world’s second largest economy China, where it launched its Chinese website at the start of this month.

Inditex has given no guidance so far on its online performance, but internet sales could be boosting growth to the tune of at least 2 percentage points, Societe Generale calculates.

“Online is allowing Inditex to access customers that wouldn’t be near one of its concept stores,” said Critchlow.

($1 = 0.7660 euros)

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