Inditex, the world’s biggest fashion retailer and owner of the Zara chain, saw annual profits growth grind to a halt as it revamped its flagship stores and expanded its global reach.
The group added a further 331 stores, taking its total to 6,340 in the year to 31 January, while also refurbishing 100 of its key outlets and rolling out its online presence worldwide.
Underlying earnings remained flat at €3.9 billion (£3.3bn) and it saw like-for-like sales growth slow to 3 per cent from 6 per cent the previous year.
But the Spanish group signalled a bounce back since the year-end, with store sales surging by 12 per cent between 1 February and 15 March.
It said yesterday that the overall performance of the spring/summer season would hinge largely on the upcoming Easter period.
Analysts had expected the firm’s bottom-line growth to be hit as it also faced the impact of currency depreciation outside the eurozone. Inditex, which also trades as Bershka, Massimo Dutti and Pull & Bear, spent €1.2bn in 2013 on its expansion and refurbishment drive and said it would ramp this up over the year ahead, to €1.35bn.
It has been reducing its reliance on the group’s economically challenged Spanish home market in recent years after the country was hit hard by the global financial crisis, instead setting its sights on emerging markets such as Asia, which now accounts for more than a fifth of all sales.
The group said its online offering now covers “most of the Northern Hemisphere”, with web launches including Zara in Canada last March.
It plans to “go live” with Zara in South Korea and Mexico later this year, taking its online presence to 27 markets.
There are some 100 stores in the UK, with two thirds under the Zara brand. The company does not provide a regional breakdown on its trading performance.
Inditex launched in 1975 when it opened the first Zara store in Spain. It initially expanded throughout Spain before setting its sights overseas, moving to the US in 1989 and the UK in 1998 along the way.
It now operates in 87 markets and employs more than 128,000 people worldwide after adding another 8,000 staff in the year to the end of January.
Anne Critchlow, retail analyst with Société Générale, said: “We are seeing recovery in southern Europe and Inditex is quite highly exposed to southern Europe. Spain, Portugal, Greece and Italy – all those countries are bouncing back.”
Sweden’s Hennes & Mauritz (H&M), the world’s second largest fashion retailer behind Inditex, said on Monday its sales rose 11 per cent in February, slightly down on analysts’ expectations.
Inditex shares, which trade at 24.6 times expected 2014 earnings compared with 22.8 times for H&M and 13 times for rival Gap, have slipped 12 per cent since late October on concern about the company’s exposure to tumbling emerging market currencies.
Inditex’s gross margin slipped in 2013 to 59.3 per cent from 59.8 per cent in 2012, but was stable in its fourth quarter at 57.9 per cent, compared with the fall to 60.8 per cent from 61.6 per cent H&M saw in the September-November quarter.
The Spanish firm made 20.4 per cent of sales in Asia in 2013, overtaking its home country on 19.7 per cent, where it has suffered from a double-dip recession and plummeting domestic spending, prompting it to quietly expand its budget Lefties brand.