Zara owner Inditex posts 7pc profit rise

CORUNNA, SPAIN: Spain’s retail giant Inditex, which owns Zara, said its 2017 net profit jumped seven per cent, a slower growth than previous years due in part to a warm autumn, as it tackles an increase in online shopping.

Speaking to reporters in Corunna in northwestern Spain, CEO Pablo Isla said the results were “satisfying” but impacted by “huge volatility in currencies in different countries and an unusually warm autumn.” Inditex, which owns eight brands including Zara, Bershka and Massimo Dutti, far outperformed its Swedish arch-rival H&M, which posted 1.6 billion euros in profits for 2017. Net profit rose to 3.37 billion euros ($4.2 billion), but while slightly above analyst expectations, it was a slower increase than in 2015 and 2016.

A mild autumn in Europe, where the group makes 60 per cent of its turnover, slowed the start of its autumn-winter collection. The Spanish company’s sales, meanwhile, rose 9 per cent to 25.3 billion euros. But in the fourth quarter, its gross margin was hit by a decision “to delay the arrival of the new spring-summer collections” in Zara, Bankinter analysts said in a note.

This decision, made to harmonise collections in its stores and online, meant it had “less items on sale at full price,” they added. Net profits would even have fallen 1.5 per cent if the group hadn’t made 257 million euros from the sale of 15 stores in Spain and Portugal, Bankinter said. “The group has started having problems to clear its stocks, which never happened before,” Sergio Avila Luengo, an analyst at IG Markets, said.

He said this was likely due to competition from “e-commerce,” including US online giant Amazon, which has moved into the textiles sector. — AFP