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Aggressive Expansion Drives Inditex Revenues Up 8% in 2014

Spain-based apparel giant Industria de Diseño Textil, S.A., better known as Inditex (ITX.MC), announced strong sales and earnings gains for the fiscal year ended Jan. 31, 2015 helped by a recovery in key European markets and aggressive expansion of its physical and online footprint. Shares in the company rose by 3.5% Wednesday on the Madrid Stock Exchange.

Sales at the parent company of the Zara fashion chains increased by 8 percent to 18.1 billion euro ($19.2 billion), from 16.7 billion euro in the prior year, making it the biggest clothing company in the world on a sales volume basis. Same-store sales growth was 5 percent. Net sales on a local currency basis increased by 11 percent.

At a news conference held at the company headquarters in Arteixo, Spain on Wednesday, chairman and CEO Pablo Isla attributed the sales increase to a recovery in the company’s biggest European markets, which represent two-thirds of the business, and investment in foreign markets.

Gross margin expanded by 100 basis points to 58.3% of net sales.

Net profit increased by 5 percent to 2.5 billion euro ($2.7 billion) from 2.4 billion euro in 2013.

Capital expenditures in the year totaled 1.4 billion euro ($1.5 billion), and included investment in automating and modernizing processes and facilities in Spain. However, the bulk of capex was used for new store openings and the refurbishment and expansion of existing locations. The company also purchased a building in New York’s SoHo which will house a new flagship Zara store.

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The company created 8,741 new jobs during the year, increasing its headcount by 6.7% from 128,313 to 137,054. Of these, more than 1,800 were created in Spain to support the firm’s global growth.

Over the course of the year Inditex opened 343 stores in 54 markets, bringing its network total to 6,683 in 99 markets.

Some of the most noteworthy openings included flagship Zara stores in Zurich (Bahnhofstrasse), Miami (Lincoln Road), Madrid (Serrano), Krakow (Rynek Glowny), Hong Kong (Queens Road) and Shanghai (East Nanjing Road) to bring its total number of stores in China to over 500 across 60 cities.

The group’s other chains also opened high-profile stores like Pull & Bear in Milan (Vittorio Emanuelle II) and Amsterdam (Kalverstraat); the Massimo Dutti stores in Vienna (Kholmarkt) and Palma de Mallorca (Born); the Bershka store in Turin (Via Roma); the Uterqüe store in Madrid’s airport; the Stradivarius store in Osaka (Shinsaibashi); the new image Uterqüe store in Barcelona’s airport; the Oysho store in Barcelona (Pelai); and the Zara Home flagship in London (Kensington High Street). In 2015, Zara Home opened its debut stores in Australia, making it the second group chain to boast a presence in the region.

New stores planned for this year include prominent openings on Oxford St. 61 (London), in Plaza Cataluña (Barcelona) and a number of openings in various US cities, including three in New York: one on Fifth Avenue and 42nd street, inaugurated last week, another in the new World Trade Centre in the heart of the city’s financial district, and a third in SoHo, in a building recently acquired by the group.

Last year, Inditex rolled out online stores for the chains in South Korea and Mexico, increasing its e-commerce footprint to 27 markets, and the company is planning to add Taiwan, Hong Kong and Macau to its e-commerce platform in 2015.

A special profit sharing plan has been approved under which employees will participate in Inditex’s earnings growth in 2015-2016. All employees at stores, manufacturing, logistics, concepts and subsidiaries around the world who have been with the group for more than two years will be eligible. Inditex will award these beneficiaries 10 percent of the year-on-year growth in consolidated profit attributable to the controlling company up to a cap of 2 percent of total profit. The beneficiaries number around 70,000 people in 54 markets.