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Inditex 1H 2014 Sales and Earnings Beat Estimates Despite Dip in Profits

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Inditex Group, parent company of fast-fashion pioneer Zara, announced financial results for the first half of fiscal 2014 that came in ahead of analyst expectations despite a dip in profits.

Net income fell 2.4% to 928 million euro ($1.2 million) from 951 million euro in the first half of FY13, primarily because of currency fluctuations, but still managed to beat analyst expectations. Currency is expected to have a diminished effect on results in the remainder of the year.

Total revenue for the period from February 1 to July 31 increased 5.6% on a constant currency basis to 8.085 billion euro (approximately $10.5 billion) from 7.66 euro in the year-earlier period as the company opened new physical and online stores in key markets. In local currency, sales rose 11 percent. Same-store sales growth was 4.5%.

In the six month period, approximately 20 percent of sales came from the company’s home country of Spain. The rest of Europe comprised 46 percent of sales, while Asia and the Americas accounted for 22% and 13%, respectively.

The company continued to expand internationally in the period, and reported that sales grew in all of its markets. As of July 31, Inditex had a total of 6,460 stores in 88 markets, with 120 net new stores in 40 different markets. During the period, all of Inditex’s brands opened flagship stores, and the company reported sales growth in all of its markets.

Zara continued to roll out its new store prototype, which features more open space, clean architectural lines, and enhanced environmental features. Key openings in the period included locations on Hong Kong’s Queen’s Road, Madrid’s Calle Serrano, Zurich’s Bahnhofstrasse, Krakow’s Rynek and Miami’s Lincoln Road. New Zara Home stores were opened in London, Athens, Tokyo and Rio.

New Pull&Bear stores included those in Jakarta, Marseille, Istanbul, Venice and Paris, and flagship stores on Amsterdam’s Kalverstraat and Milan’s Corso Vittorio Emanuele.

Massimo Dutti also continued to update its image, opening a flagship store on Madrid’s Calle Serrano and new designer stores in Beijing, Toronto, Budapest, Palma de Mallorca, Amsterdam, and elsewhere.

Stradivarius and Bershka’s notable openings were located in Nagoya, Saint Petersburg, Istanbul, Marseille and Jakarta. In August, Stradivarius opened its first UK store in London’s Westfield Stratford City shopping.

Uterqüe continues to upgrade its store image, configuring elegant establishments dominated by marble, wood and painted metal which combine to create a boutique feel for customers.

The company also operates online stores in 25 markets, including 21 European markets, China, Japan, the US, Canada and, as of early this month, Mexico. In the weeks to come, Zara’s online platform is due to go live in South Korea, and it will expand its online offering in China with the opening of its virtual storefront on Alibaba’s Tmall. The remaining fashion concepts of the Group will also soon launch online in Mexico.

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