Inditex finds the going tough in its valuable international markets

ZARA OWNER Inditex suffered a worse-than-expected fall in its second quarter margins as trading in its lucrative overseas markets turned tougher.

The Spanish company’s second quarter gross margin fell to 56.5 per cent from 58.9 per cent a quarter earlier, further than analysts had expected.

“We can only assume that the competitive situation has again deteriorated in emerging markets, as was clear from ASOS yesterday,” said Credit Suisse analyst Simon Irwin in a note to clients.

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Online fashion retailer ASOS, hit by the strength of sterling, warned on profit on Tuesday, saying it needs to cut prices and improve service in international markets to reverse a sharp slowdown in sales growth.

Inditex, now the world’s largest clothing retailer by sales, has outperformed many rivals in the global crisis through its aggressive expansion to some 88 markets including fast-growing cities in China.

But other European retailers are following its international path and results were hit this year by the fall of currencies against the euro in markets like Russia, where analysts estimate it makes almost 6 per cent of its sales, and Japan, where it makes an estimated 4 per cent.

Inditex continued to complete refurbishments of large, flagship stores, designed to improve shoppers’ experience in an age of growing online shopping.

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