Tech-savvy Inditex's Q1 profit up 18%

Inditex has adopted one of the retail industry's most advanced inventory- tracking systems across all Zara stores, which make up two-thirds of group sales. It also launched Zara online in Singapore, Malaysia, Thailand and Vietnam.
Inditex has adopted one of the retail industry's most advanced inventory- tracking systems across all Zara stores, which make up two-thirds of group sales. It also launched Zara online in Singapore, Malaysia, Thailand and Vietnam.PHOTO: BLOOMBERG

MADRID • Inditex, the world's biggest clothing retailer and owner of the Zara brand, reported an 18 per cent rise in first-quarter net profit, in line with analysts' forecasts and stretching its lead over rivals like Sweden's Hennes & Mauritz .

The Spanish company, which also owns younger fashion chain Pull&Bear and upmarket label Massimo Dutti, said yesterday that net profit was €654 million (S$1 billion), while earnings before interest, tax (Ebit), depreciation and amortisation were €1.1 billion.

Inditex has consistently outperformed H&M and other outlets in the past few years as a result of its online growth and fast-fashion model that allows it to whistle the latest trends from the runway into stores within days.

The tech-savvy retailer is trying to widen the gap further, as it plans to expand its online offering to new markets and upgrade its inventory management technology.

"Inditex is one of very few non-food retailers that find themselves well adapted for the online world," wrote Societe Generale analyst Anne Critchlow.

Inditex so far has defied the gloom afflicting other European apparel retailers contending with sluggish domestic economies, the rise of e-commerce and a shift in consumer spending away from clothing.

H&M has warned of price cuts to clear inventory, while British apparel chains like Next and New Look Retail Group have struggled to align their offerings with changing consumer tastes.

Inditex has adopted one of the retail industry's most advanced inventory-tracking systems across all Zara stores, which make up two-thirds of group sales.

Its Massimo Dutti office wear chain has also started using so-called radio-frequency identification tags, which automatically track the location of individual garments and help prevent theft.

The retailer plans to introduce the technology in other formats in coming months, and all of its stores will use the system within three years, said chief executive Pablo Isla.

Analysts expect Inditex to benefit from a more positive currency environment this year. Close to half of the company's 7,385 stores, operating in 93 markets, report their earnings in currencies other than the euro. The firm's local currency sales rose 12 per cent from Feb 1 to June 3.

"With currency impacts looking broadly neutral for the remainder of the year, both in terms of translation and transaction, we see a year of good Ebit growth and margin increase," Ms Critchlow said.

In Inditex's first quarter, which runs from Feb 1 to April 30, it opened new stores in 30 markets and continued with an online push in South-east Asia, launching Zara online in Singapore, Malaysia, Thailand and Vietnam.

It will launch in India later this year.

REUTERS, BLOOMBERG

A version of this article appeared in the print edition of The Straits Times on June 15, 2017, with the headline 'Tech-savvy Inditex's Q1 profit up 18%'. Print Edition | Subscribe