Inditex regains top spot as profit lifts 30%

INDITEX yesterday rose the most in two years in Madrid, retaking the crown as Spain’s largest company, after the clothing retailer reported a 30% gain in first-quarter profit.

The stock advanced as much as 10%, the biggest intraday gain since May 10 2010. The shares were 8,6% up at ¤73,42. That gave the owner of the Zara chain a market value of ¤45,8bn, compared with ¤44,5bn for Telefonica.

Net income rose to ¤432m in the three months to April, the Arteixo, Spain-based company said yesterday. Inditex, the world’s largest clothing retailer, is adding outlets in emerging markets and expanding its online offering to offset weaker consumer spending in its debtravaged home country.

“With what’s going on in the euro zone, it’s amazing to beat estimates on better like-for-like sales,” Société Générale analyst Anne Critchlow said.

The Spanish company competes with Esprit Holdings, which fell 22% in Hong Kong before the shares were suspended yesterday.

Esprit CEO Ronald van der Vis is resigning in the middle of the retailer’s turnaround plan, becoming the second top official to quit in six months.

“In a very volatile market environment, Inditex has a very flexible business model and is much better positioned than the likes of H&M and Esprit,” Simon Irwin, an analyst at Liberum Capital, said.

Mr Irwin also cited increasing e-commerce sales and the company’s sourcing model.

Inditex CEO Pablo Isla said yesterday he had “full confidence” in the future of the Spanish economy, speaking on a conference call with analysts.

“Despite a softening market trend in Spain, we think Inditex continues to take share from independents on account of its newness,” analysts at Bank of America Merrill Lynch, including Richard Chamberlain, wrote in a report yesterday.

“It should continue

to benefit from its increasing online and Asia exposure.”

Inditex has reduced its dependence on its home market. Spain became the fourth euro member to seek a bail-out since the start of the region’s debt crisis, with a request for as much as ¤100bn to rescue its banks. About 22% of the company’s sales will come from Spain this year, compared with 45% from emerging markets, Ms Critchlow said.

First-quarter sales rose 15% to ¤3,42bn, Inditex said. That beat the ¤3,3bn average of 22 analysts’ estimates.

Revenue in local currencies from February 1 to June 10 was 14% higher than in the yearearlier period. Bloomberg