Mar 22, 2010
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Zara owner's profits rise on strong Asia sales

Mar 22, 2010

By Fabien Zamora (AFP)

MADRID — Spain's Inditex, Europe's biggest clothing retailer and the company behind Zara, posted a rise in profit as strong sales abroad, especially in Asia, offset sluggish domestic demand.

Photo : AFP/Miguel Riopa

Inditex, which also owns the Bershka and Massimo Dutti chains earned a net profit of 483 million euros (666 million dollars) in the fourth quarter, against 410 million euros in the same year-ago period, it said in a statement.

For the full year 2009 the company's net profit rose to 1.31 billion euros from 1.25 billion euros in the previous year. Analysts polled by Dow Jones Newswires had expected a full year 2009 net profit of 1.27 billion euros.

Net sales during the fourth-quarter rose to 1.9 billion euros from 1.68 billion euros during the same year-ago period and reached 11.08 billion euros for the full year compared to 10.41 billion euros last year.

Sales in Spain, which is being wracked by its worst recession in over 80 years that has driven the jobless rate to nearly 19 percent, accounted for 31.8 percent of total sales, compared with 33.9 percent in 2008.

Sales outside Spain accounted for 68.2 percent of total sales, up from 66 percent in 2008.

"A highlight was the significant increase in sales in Asia, which in 2009 accounted for 12.2 percent of total sales versus 10.5 percent a year earlier," the statement said.

Inditex continued its strategic push into Asia's three top markets last year with the opening of 10 new stores in Japan, 12 new stores in South Korea and 41 new outlets in China, including the first Massimo Dutti store in Beijing.

It opened a total of 343 new stores around the world in 2009 and plans to add between 365 and 425 locations this year across its eight formats, with 95 percent of the openings outside Spain.

Over 40 percent of the commercial retail space which it will add will be in Asia, including its first opening in India in May.

"The opening in India will be very strategic for the medium term," said Inditex chief executive Pablo Isa told a conference call with analysts, adding that China would be the "major driver" of the company's Asian expansion.

Zara, which opened its first shop in China in 2007, plans five branches in India in 2010, starting in New Delhi followed by Mumbai and then other cities.

Investment bank Goldman Sachs predicts India, the world's second-most populous country after China, will expand annually by some 6.2 percent from 2011 to 2050.

Isla said Inditex's plan to start selling its flagship Zara brand clothes for the autumn/winter 2010 season online in Spain, France, Italy, Portugal, Britain and Germany "was on track."

Further details of the start of online sales will be given when Inditex presents its first quarter results, he added.

Sweden's H&M, Europe?s second-largest clothing retailer, already sells its products online in Europe while the Gap Inc., the largest US group, does the same in its home market.

Store sales in local currencies have increased by 14 percent between February 1 and March 14 over the same time lasy year.

Inditex had 4,607 stores in 74 countries and it employed over 92,000 people at the end of last year.

The company is controlled by Amancio Ortega, Spain's richest man. Forbes magazine estimates the railway workers' son has a net worth of over 18 billion dollars, making him the world's 10th richest man last year.

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