Inditex profit rises 26 pct with brisk start to new season

A recovery in Spanish high street spending and warm weather across Europe helped boost sales at fashion giant Inditex in the first half, with a healthy start to the new season auguring well for the owner of Zara.

Inditex, the world's biggest clothing retailer based in the northwestern Spanish city of Coruna, said sales in local currencies in the six weeks to September 10 jumped 16 percent, a harbinger for a healthy third quarter.

Like-for-like sales rose 7 percent in the six months to end-July, as cheap oil and credit in Europe and Spanish jobs growth translated into more money in the pockets of Inditex shoppers during a scorching European summer.

Inditex results come on the heels of rival Hennes & Mauritz , who on Tuesday reported its weakest monthly sales growth in August in more than two years citing exceptionally warm weather in many of its large European markets.

Ads

Because the Spanish fashion chain sources close to where it sells, it is able to keep up with changing demands, or even changing weather, more quickly than rivals.

European sales make up two thirds of the group's total and Spain alone, where the economy is recovering after a long crisis, accounts for almost one fifth.

SocGen's Anne Critchlow described current trading as "very strong indeed" in a note to clients, predicting a slight out-performance in the shares, but noting that performance is likely to slow slightly in the second half.

Net profit rose 26 percent to 1.17 billion euros ($1.32 billion), in line with expectations in a Reuters poll.

In the February to July period sales climbed 17 percent to 9.42 billion euros, also meeting expectations and underpinned by a weak euro versus the dollar. Core earnings (EBITDA) rose 22 percent to 1.97 billion euros.

A conference call at 0700 GMT may shed more light on how the group fared in the 88 markets in which it operates, with eyes on slowing powerhouse China in particular after a currency devaluation last month.

Also in focus will be any signs that the group's global growth is flagging, following a share price gain which puts the stock on multiples of around 31 times this year's predicted earnings, versus a historical average of about 25 times, according to analysts at Banc Sabadell.

($1 = 0.8857 euros)