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Inditex 1Q Net Profit Up 30% As Gross Margin Inches Higher

06/13/2012 | 01:59am US/Eastern
   By David Roman 
 

MADRID--Inditex SA (>> Inditex SA), the owner of fast-fashion pioneer Zara, Wednesday posted a strong 30% rise in net profit for its first quarter, driven by continued expansion in emerging markets.

The world's largest fashion retailer by sales, based in La Coruna, Spain, said net profit for the three months ended April 30 was EUR432 million, up from EUR332 million a year earlier. Analysts had expected net profit to come in at EUR379 million, according to FactSet.

Sales increased 15% to EUR3.42 billion, boosted by new store openings, while its gross margin rose to 60.2% from 58.8%. Inditex said it opened 464 new stores in the quarter, and had 5,618 stores in 84 countries as of April 30.

Because of its global expansion drive--the company has opened more than a store a day, on average, in recent years--Inditex is becoming less reliant on sales in Spain, now accounting for around a quarter of the total.

In contrast, it is expanding rapidly in the fast-growing markets of Asia and Latin America. In March the company said it expects to have 425 stores across China by the end of the year. Inditex and Swedish rival Hennes & Mauritz AB (HM-B.SK) are increasingly dominating the global fashion retail market. H&M in March posted continued profit growth and said it aims to expand its global store chain by 10% to 15% a year. H&M is due to report its second-quarter earnings on June 20.

Competitors such as Gap Inc. (GPS) are struggling to keep pace with the front two. The U.S. retailer last month posted unchanged first-quarter profit compared with a year earlier.

Inditex shares closed Tuesday at EUR67.58, valuing the company at EUR42.2 billion.

Write to David Roman at david.roman@dowjones.com

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