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Inditex reports 10% increase in Q1 profit

Inditex recently reported a 10 per cent rise in its first-quarter profit, as foreign currency effects moved back in its favor after two years. The company is currently under pressure to deliver strong like-for-like sales without the margin dilution that has affected others in the apparel sector, plagued by out-of-season sales as shoppers wait for discounts or hunt for bargains online.

The world's biggest clothing retailer reported net profit of 734 million euros ($832 million) for the three months from February 1 to April 30, 2019. Its sales increased by 5 per cent to 5.93 billion euros. Sales at constant exchange rates for the first six weeks of the second quarter increased by 9.5 per cent as shoppers snapped up items like jewel-toned blazers and long printed dresses from Zara's spring collections. Its sales growth however, was lower than that expected by analysts due to adverse weather conditions in the latter part of the period when it was wet and cold across much of southern Europe.

Inditex maintained its full-year guidance of 4-6 per cent growth for like-for-like sales. RBC Capital Markets estimated it had booked like-for-like currencies of around 6.5 per cent during the first weeks of the second quarter, against around 2 per cent in the first quarter.

Inditex generates over half of its sales in other currencies that have to be converted back into euros for the financial report. Those currencies have strengthened slightly against the euro compared to a year ago, on average, helping reported sales.