Published: Thu, March 15, 2018
Business | By Tara Barton

Inditex profits rise as online sales grow

Inditex profits rise as online sales grow

The retailer said online sales grew 41% over the year to reach 10% of net sales across the group in 2017.

But gross margin was 56.3 per cent of sales, compared to 57 per cent.

Zara's owner Inditex reported another year of growth this morning, but its margins were squeezed as the stronger Euro.

Large stores in prime shopping areas act as a showcase for clothing which can be bought there or ordered later online via the app or website.

Sales at constant exchange rates rose 10 percent to 23.5 billion euros in 2017.

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While some analysts have said Inditex is vulnerable to currency fluctuations related to the strong euro-up 16 percent against the dollar in the last year-because it sources a higher proportion of garments closer to home rather than relying on an Asian manufacturing model, it has allowed the company to respond more quickly to new trends.

Societe Generale analyst Anne Critchlow said Inditex aimed to offset currency moves by the timing of some of its spending. Clothing retailers are having to invest in memorable product demonstrations and store-specific content to attract customers in their twenties and early thirties, whose increasing use of online players such as Amazon has ravaged bricks-and-mortar retail chains in recent years.

Inditex trades at around 22 times estimated 2018 earnings compared to around 15 times earnings for Swedish rival H&M and around 20 times earnings for Associated British Foods, owner of budget fashion brand Primark. This led analysts to expect a slightly negative effect to fourth quarter sales as January - the last month of Inditex's financial year - would not benefit from these ranges.

Inditex's board of directors said it will submit a motion for the payment of a €0.75 per-share dividend, marking year-on-year growth of 10.3pc, at the Annual General Meeting scheduled for July.

On the same basis, sales grew 9 percent in the first five weeks of the new financial year as new spring collections hit shop floors with items like printed maxi dresses, linen separates and pastel blazers at Zara. This raised the payout ratio to 69%, up from last year's 67%, said Societe Generale.

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