You are here: Home » Reuters » News
Business Standard

Currency effects, later launch squeeze margins at Zara owner Inditex

Reuters  |  LA CORUNA, Spain 

By Sonya Dowsett

LA CORUNA, (Reuters) - Cash-rich Inditex, owner of fashion chain Zara, reported a squeeze on its margins in the three months to the end of January because of currency effects and a later launch of spring and summer collections.

The retailer, whose brands include upmarket label and Home, reported annual net profit of 3.37 billion euros ($4.2 billion), in line with analysts' expectations.

Inditex's gross margin was down around 140 basis points in its fourth quarter, steeper than an expected 120 basis point drop, said of

"We think this is mainly due to currency mix, a delay in the start of the Spring collection to the first quarter and lower full price sales than expected in the second half of the fourth quarter," he said.

is vulnerable to foreign exchange rates as it reports in euros yet makes around half its sales in other currencies.

Its shares fell to a three-year low last month after analysts cut their price targets due to the effects of a strong euro, which has strengthened against most global currencies since the beginning of the year.

The stock was leading losses on Spain's blue-chip stock index early on Wednesday, down around 4 percent by 0830 GMT.

ONLINE SALES

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

It is the first time has broken out Unlike many fashion retailers struggling with competition from such as Amazon, is holding up well as brands like combine their high street presence with a offering.

Large stores in prime shopping areas act as a showcase for clothing which can be bought there and then, or ordered later online via the app or website. can be picked up or returned in store.

The 10 percent of compare to 12 percent for Swedish rival but lag many British retailers such as Next with nearly 40 percent of or with 18 percent of clothing and home sales online, said of

"Clearly, the for and Inditex should rise over time," she said.

The company said sales at constant exchange rates grew 9 percent in the first five weeks of the new financial year as shoppers snapped up items from the spring/summer collections like printed maxi dresses, linen separates and pastel blazers from

The company launched transitional spring ranges slightly later this year, in February compared to January. 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.

The company proposed a 10.3 percent increase in the dividend to 0.75 euros per share. This raised the payout ratio to 69 percent, up from last year's 67 percent, said .

($1 = 0.8066 euros)

(Reporting By Sonya Dowsett; Editing by Paul Day)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Wed, March 14 2018. 14:04 IST
RECOMMENDED FOR YOU