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Inditex issues "strong" H1 earnings and sales

Spanish fashion giant Inditex has issued what analysts say are yet another strong set of results as it revealed higher first-half earnings and sales thanks to ongoing investment in its online and store network.

Earnings in the six months ended 31 July amounted to EUR1.25bn (US$1.39bn), an increase of 8% on EUR1.17bn a year earlier. Gross margin narrowed to 56.8% from 58.1%.

Total sales for the retailer, which operates 7,096 stores under nameplates including Zara, Pull & Bear, Massimo Dutti and Bershka, reached EUR10.47bn, an 11% increase on revenues of EUR9.42bn in the prior year thanks to positive growth in all geographical areas. Sales in local currencies grew 16%, while like-for-like sales were up 11%.

Inditex opened new stores in 38 markets during the first half, including the launch of Zara in Vietnam on 8 September. The company also continued to expand its online retail offering to 11 countries in the period.

Inditex chief executive, Pablo Isla, highlighted "the importance of its model which fully integrates bricks-and-mortar stores and online", emphasising the technological investment being made by the company in this area. He added: "Both our online and bricks-and-mortar stores are seamlessly connected, driven by platforms such as mobile payment, and other technological initiatives that we will continue to develop."

For the start of the second half, Inditex said sales in local currencies in stores and online have grown 13% between 1 August and 18 September.

Bernstein analyst Jamie Merriman said the company has delivered "yet another strong set of results", with impressive sales growth.

"In the second half of the year, we believe the key questions will be: 1) will the gross margin pressure of the last few years begin to reverse, and 2) will Inditex continue to deliver such strong like-for-like sales growth over the next 12 months as the company faces >10% like-for-like comparisons.

"We continue to believe that Inditex has the strongest business model in apparel retail, and we expect Inditex to deliver earnings growth at an average rate of 14% over the next five years."


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