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June 29, 2017

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Zara owner Inditex profit growth slows, stores expand

MADRID--Spanish textile titan Inditex, owner of global fashion brand Zara, reported Wednesday slower profit growth in 2013 as it poured money into new stores, with up to 500 more to open this year.

Created 40 years ago in the northwestern Galicia region by the son of a railwayman, Amancio Ortega, the group boasted a worldwide empire of 6,340 stores in 87 markets at the end of its 2013 business year, which runs to Jan. 31.

Though Ortega, Spain's richest man and still Inditex's biggest shareholder, retired as chairman and chief executive in 2011, handing over to Pablo Isla, the group's philosophy of expanding with new stores and online sales has not wavered.

In 2013, Inditex's sales rose by 4.9 percent from the previous year to 16.72 billion euros (US$23 billion), the group said in a statement.

But despite stressing "strict control of operating expenses," the rising costs associated with new stores and higher sales curbed net profits, which edged up by 0.6 percent to 2.38 billion euros in the same period.

That result represented a marked slowdown from the previous year, when sales soared 16 percent and net profit by 22 percent.

Inditex, which besides Zara owns a string of retail brands including Pull & Bear, Massimo Dutti, Bershka, Stradivarius, Oysho, Zara Home and Urterque, said it had raised investments to 1.24 billion euros in 2013 from 1.09 billion euros the year before, "driven by retail space growth in the year."

The group said it expected to invest another 1.35 billion euros in 2014, mostly in new retail space.

Inditex planned 450-500 new openings and the absorption of 80-100 small units into neighbouring stores in the year ahead, it said.

Inditex said it began online sales in Greece in March and planned to launch them in Romania in April, and South Korea and Mexico later in the year.

The new business year began with a sales spurt, it added, with sales in local currency terms for the Feb. 1-March 15 period rising 12 percent from a year earlier.

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