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Zara Powers Inditex to Gains, With Growth Planned Online and at Stores

The Zara juggernaut continued for parent Inditex in 2017, as the company reported strong growth in brick-and-mortar stores and online sales.

In a Nutshell: Inditex, owner of the Zara fast fashion chain, reported increases in net sales and income for 2017, as it continues to roll out its global, fully-integrated store and online platform.

New space in prime locations grew 7.4% in fiscal 2017. At the end of last year, Inditex operated 7,475 stores, with 183 openings in 58 markets. Inditex said from Feb. 1 to March 11, store and online sales have increased 9 percent.

Inditex said it has appointed Carlos Crespo as chief operating officer, with responsibility for coordinating the functions of logistics, IT, procurement and sustainability. Crespo was formerly the director of internal audit and has been succeeded in that post by Paula Mouzo.

On the logistics front, the company said it continued to invest in new technology, including the expansion of new automated storage and distribution systems to various platforms, and that construction work at the logistics connection hub in Lelystad, the Netherlands, and a new distribution center in A Laracha, Spain, continues on schedule.

Sales: Net sales for the year ended Jan. 31, increased 9 percent to 25.34 billion euros ($31.46 billion), compared to 23.31 billion euros ($28.85 billion) in fiscal 2016. Like-for-like sales growth rose 5 percent compared to 10 percent growth a year earlier, with strength across all geographic areas and in all concepts, Inditex said.

Online sales grew 41 percent to account for 10 percent of group net sales in the year. Global online sales were launched in the year for Zara in Singapore, Malaysia, Thailand, Vietnam and India. Net sales for Zara rose 8 percent in the year to 16.62 billion euros.

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Earnings: Net income increased 7 percent to 3.37 billion euros ($4.17 billion) from 3.16 billion euros ($3.91) the prior year. Gross profit also grew 7 percent to 14.26 billion euros ($17.65 billion), resulting in a gross margin of 56.3%. Earnings before interest and taxes (EBIT) reached 4.3 billion euros ($5.32 billion), 7 percent higher than the previous period. Zara’s EBIT increased 9.4% to 3.02 billion euros ($3.74 billion).

CEO’s Take: Pablo Isla, Inditex chairman and CEO, described 2017 as a year of “solid growth,” and highlighted, “the unique strength” of the company’s integrated stores and online model, and the growth potential for each. “The prescient investments made in technology and logistics in recent years, coupled with space optimization, mean the company is well placed for continued growth across all its markets,” he said.

While some analysts have said Inditex is vulnerable to currency fluctuations related to the strong euro–up 16 percent against the dollar in the last year–because it sources a higher proportion of garments closer to home rather than relying on an Asian manufacturing model, it has allowed the company to respond more quickly to new trends.

Isla told a press conference at the company’s headquarters in northern Spain that margins should hold up this year, Reuters reported.

“Looking to the year ahead, we should not see a negative impact on margin at current exchange rates,” Isla said, according to Reuters.

The company’s shares closed up 4 percent to 25.24 euros ($31.22).