Inditex First-Half Profit Beats Estimates as Sales Increase

MADRID, Spain — Inditex SA, the Spanish owner of the Zara and Massimo Dutti chains, reported a 0.7 percent increase in first-half profit that beat analysts' estimates as the retailer expanded by opening 95 stores in 40 markets.

Net income climbed to 951 million euros ($1.27 billion) in the six months through July, the Arteixo, Spain-based company said today in a statement. The average of seven estimates compiled by Bloomberg was 934 million euros.

Inditex, the world’s largest clothing retailer, is adding stores in countries such as China as it seeks to offset weaker growth in markets including Spain. The company said it had 6,104 stores in 86 markets as of the end of July. Sales expressed in constant currency terms gained 10 percent from Aug. 1 to Sept. 14, while first-half sales gained 5.7 percent to 7.7 billion euros.

“Even as Inditex should continue to report solid growth in the coming quarters, it will be very difficult for the company to beat last year’s extraordinary good earnings growth,” Sofia Rebuelta, a Madrid-based analyst at Interdin Bolsa who recommends selling the stock, said ahead of the results.

Earlier this week, Hennes & Mauritz AB, Europe’s second- biggest retailer, reported monthly sales that beat analysts’ estimates, sending its shares to a record high.

“A positive trading update since August could boost the stock, following the strong performance of H&M reported this week,” Rebuelta said. “However, Inditex shares are already expensive and the current share price is discounting growth forecasts that are almost unsustainable in the medium term.”

Inditex fell 0.5 euros, or 0.4 percent, to 110.2 euros in Madrid yesterday, trimming this year’s gain to 4.5 percent.

The gross margin, a measure of profitability, shrank to 58.6 percent from 59.6 percent.

By Manuel Baigorri, Emma Ross-Thomas; Editors: Celeste Perri, Paul Jarvis, Kenneth Wong