Zara owner sees profits rise

Zara clothing store.
Zara clothing store.
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Owner of fashion retailer Zara, Inditex, posted a 5 per cent rise in profit for 2014, as an economic recovery boosted customer appetite for fashion in its biggest European markets and set it on course for further expansion via bigger stores.

The world’s biggest fashion retailer, based just outside La Coruna at Spain’s northwestern tip, said profit rose to £2bn and like-for-like sales rose five per cent, while overall sales rose eight percent, meeting market expectations.

The Zara owner said sales in the six weeks to March 14 rose 13 per cent in constant currencies.

“This is a beat versus existing consensus forecasts at around 4 per cent, suggesting good support to date for full year estimates,” said Societe Generale analyst Anne Critchlow, who estimated a 6 per cent rise in like-for-like sales in the six weeks to March 14 and expected the shares to be supported.

In comparison Hennes & Mauritz saw a better-than-expected 15 per cent sales rise in February. Inditex shares are trading at around 30 times this year’s expected earnings, versus around 25 times for H&M.

Inditex’s biggest challenge at present is to keep up with online-only shopping upstarts like Germany’s Zalando or Britain’s Asos.

With that in mind it is discretely closing smaller branches and concentrating on big flagship stores, such as the 4,400 square metre SoHo site in New York’s Manhattan acquired earlier this year.

The company confirmed that strategy, saying it would open up to 480 new shops and close 80 to 100 smaller shops in locations nearby.