Inditex First-Half Earnings Beat Estimates on Online Expansion

ARTEIXO, Spain – Inditex SA, the world's biggest clothing retailer, reported first-half profit that beat analysts' estimates as the company prioritised online expansion over store openings.

Operating profit increased 8 percent to €1.61 billion ($1.8 billion) in the six months through July, Inditex said in a regulatory filing Wednesday. Analysts expected €1.58 billion. Revenue rose 13 percent in the first weeks of the third quarter, excluding currency shifts, slowing down from growth of 16 percent in the first half.

Inditex, which operates eight brands through more than 7,000 stores in 90 countries, this year lowered its target for retail space expansion as it instead focuses on bolstering online shopping. The strategy also includes bigger stores in key markets, as part of an attempt to maintain growth after revenue increased eight-fold since the Arteixo, Spain-based company’s 2001 initial public offering.

The retailer is benefiting from the steady pace of economic growth in Spain, where Inditex gets about a fifth of its sales. The local clothing market grew an average 3 percent in the three-month period through July, according to the Spanish statistics agency.

Currencies harmed Inditex on two fronts as the strong dollar raised costs for the 35 percent of garments the retailer buys from Asian countries, according to Kepler Cheuvreux analyst Natalia Bobo. Meanwhile, the weakness of the Russian ruble, British pound, Mexican peso and Turkish lira eroded sales growth, she said.

By Rodrigo Orihuela; editors: Matthew Boyle, Thomas Mulier and Paul Jarvis.