Spanish Inditex saw its turnover grow 7 % and its profit by 10 % in the first half of its financial year, despite the challenges on the fashion market. Zara's and Massimo Dutti's parent company too feels the consequences of a decreasing fashion market
Margins under pressure
The February to July semester saw Inditex' turnover grow to 12.82 billion euros, exactly on the crosshairs of analysts' expectations. Net profit went up 9.9 % to 1.55 billion euros, partly because of a new system of accounting - without which net profit growth would have been 7 %.
Compared to arch rival H&M, the Zara owner has a slower growth but a more stable financial base. H&M's turnover went up 11 % but profits only reached 450 million euros. Bloomberg analysts say that Inditex too suffers from prices and profit under pressure as the gross margin went down in the second trimester, due to a 815 million euro profit that was below expectations - while sales went up. Earlier this week, fashion discounter Primark already admitted its turnover is decreasing in stores that have been open for more than a year.
Growth on all markets
Inditex itself stresses that it has achieved a record turnover and that even like-for-like there was growth on all its markets. Average growth was 5 %, leading CEO Pablo Isla to raise his full-year forecasts from 4 % to 6 %.
The group continues to invest in rapid online expansion, combined with a store network optimalisation: Inditex chooses to close smaller stores and turn to large stores on prime locations. The group is to start a Colombian, Philippine, South-African and Ukranian webshop in a bid to reach its target of being globally available by 2020.