Zara parent’s margin remains flat, shares drop

Zara-owner Inditex saw record revenue and profits during the first half of FY19, though flat gross margin caused share prices to dip.

Net sales rose 7 per cent year on year to €12.82 billion ($20.6 billion), while net profit rose 10 per cent to €1.55 billion ($2.5 billion).

According to Inditex executive chairman Pablo Isla, the results reflected strong first half performance, with like-for-like growth across all brands and geographies.

“The investments we have made in the stores as well as in logistics and technology have been key elements in the development of our customer focused integrated online and offline store platform,” Isla said. 

However, gross margin stayed steady at 56.8 per cent, up from 56.7 per cent. As a result, shares fell from a high of €28.59 per share ($46 per share) on the 10th, to a low of €26.97 ($43.48 per share) per share on the 12th.

According to Isla, the business works to maintain gross margin, rather than maximise it.

“We are always thinking about the medium and the long-term evolution of the company,” Isla told analysts. 

“Gross margin is a combination of many different things. You have, of course, the like-for-likes as growth. You have the product mix. You have the fashion trends. You have currencies. You have raw material costs. There are many, many elements involved.”

The business noted it opened, enlarged and refurbished stores across all geographies during the half, and continued to expand its online platform into new markets – seeing 7,420 stores open across 96 markets, with 62 sporting the group’s online platform.

During the beginning of its second half, Inditex has seen sales in local currencies increase 8 per cent for the period between 1 August and 8 September. 

The business expects like-for-like sales growth of between four and six per cent in FY19. 

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