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Inditex and H&M See Strong Sales Growth, Continue Store Expansion

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The world’s largest fast fashion leaders, Inditex and Hennes & Mauritz (H&M) reported strong sales growth owed to an uptick in consumer spending in their European home markets, and both retailers continue to invest in store expansion.

Spain’s Inditex, parent company of Zara, reported Wednesday that store sales in local currencies increased by 11 percent between Feb. 1 and June 8, compared to the 8 percent rise recorded for the year ended Jan. 31, 2014.

Net income dipped 7.3% to €406 million ($549 million) pressured by the strength of the euro, but the profit still surpassed analysts’ expectations.

In terms of expansion, Inditex opened more than 300 stores in 2013, and Zara opened 53 new stores in 19 different countries in the three months ended April 30, bringing the group’s count to 6,393 stores in 88 markets.

Inditex also intends to continue its expansion into e-commerce. This fall/winter season, Zara will roll out its e-tail platform in South Korea and Mexico, adding to the 25 markets where Inditex is already selling online (21 European markets, the U.S., Canada, Japan and China). Zara will also extend its offering in China this fall/winter through the launch of an online store in the country’s Tmall e-commerce platform.

Bernstein analyst Jamie Merriman told Reuters, “Inditex continues to deliver strong operational performance.” She added, “We continue to believe Inditex has the best business model in apparel retail, and that there is a significant opportunity for space opening for Inditex ahead.”

Sales at Sweden’s H&M were up 19 percent in May over the same period last year boosted 3-4 percentage points by calendar effects–which the retailer said would be reversed in June–and sizeable store expansion. As of the end of May, the retailer’s store count totaled 3,285 up from 2,908 the previous May.

For the three months to May 31, H&M’s sales including VAT increased 16 percent in local currencies to 44.18 billion Swedish kronor ($6.6 billion). The retailer has experienced steady sales growth so far in the year, with sales spiking 17 percent in April, 13 percent in March and 11 percent in February.

Both retailers have performed well of late as price conscious consumers continue to seek deals.

Inditex said it would propose a a 5-for-1 stock split at its annual general meeting scheduled for July 15, a move companies tend to take when stock prices are very high. Shareholders will receive five shares for every share they own at the close of business on July 25, 2014. The new shares will begin trading on July 28, 2014.

At time of publication, Inditex shares were up 1.2% to 111.5 euro ($150.8) on the Spanish stock exchange. H&M shares were down 0.1% to 291.5 Swedish kronor ($43.51) on the Stockholm exchange.

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