Zara owner Inditex posts 40pc profit jump as price rises slow

MADRID: Zara owner Inditex on Wednesday beat expectations with a 40% jump in half-year profit despite the world’s biggest fashion company slowing the pace of its price increases.

The company posted a net profit of 2.5 billion euros for the six months to July 31.

Inditex has widened its lead over Swedish rival H&M this year by delivering fashion trends faster from nearby suppliers at prices that allow it to cope with inflationary pressures.

But analysts expect Inditex’s strong financial position will allow it to keep prices stable or even lower them in the face of weakening demand and lower inflation.

Zara plans further store expansion in the US, a market that two years ago became Inditex’s biggest after Spain.

Its sales rose 13.5% to 16.9 billion euros as Inditex reported a gross margin of over 58.2%.

Inditex, which also owns Bershka, Pull & Bear and other brands, said sales at constant currencies between Aug. 1 and Sept. 11 were 14% higher than a year earlier, showing that the pace of summer sales continues as autumn collections start to arrive.

Inditex kept prices relatively stable over the summer, RBC analyst Richard Chamberlain said in a recent note to clients.

With a big share of its costs in euros, Inditex said it expects currency to have a -3.5% impact on sales this year, worse than the -2.5% impact it expected previously.

The company kept its outlook unchanged, saying it “continues to see strong growth opportunities” as it currently has low market share in the 213 countries where it has a presence.

Inditex was among the first fashion retailers to raise prices in response to surging inflation early last year. Its higher and more diverse pricing strategy outside its home market of Spain helped it post record margins.