Zara owner Inditex's profit up 10% as it grows in emerging markets

[LA CORUNA, Spain] The world's biggest clothing retailer, Zara owner Inditex, reported a 10 pe rcent jump in annual net profit on Wednesday as strong growth in emerging markets and increased online presence outweighed negative currency effects.

Strong sales at Inditex, known for speeding the latest trends from runway to stores in a matter of days, helped net profit grow to 3.16 billion euros (S$4.668 billion) in the year to end-January.

The company opened stores in 56 countries during the year, including first openings in New Zealand, Vietnam and Paraguay, bringing its total store count to over 7,200. It launched online sales across its stable of brands in Turkey and said on Wednesday it would start online sales in India in 2017.

Sales at constant exchange rates rose 13 per cent in the first six weeks of the new financial year as customers snapped up items from spring collections like double-breasted jackets, palazzo trousers and embroidered tulle tops from flagship brand Zara.

This implies a slowdown in like-for-like sales from recent years after a period of exceptional growth where sales were boosted by factors such as moving its brands to larger stores in prime retail locations.

Inditex reports in euros but makes more than half of its sales in other currencies, meaning falls in value of currencies like the Mexican peso and the Russian rouble against the euro affect earnings and profit margin.

Gross profit margin was 57 per cent in 2016 financial year, down from 57.8 per cent in 2015.

Concerns on lagging profit growth relative to aggressive sales growth at the retail behemoth whose stable of brands includes homewares chain Zara Home and teen label Pull and Bear have weighed on Inditex shares.

They have underperformed European stocks by around three per cent over the past year. However, analysts expect currency effects to swing in Inditex's favour over the next 12 months.

Cash-rich Inditex proposed on Wednesday a 13 per cent increase in dividend to 0.68 euros per share.

REUTERS