16 Sep 2009
Sept. 16 (Bloomberg) -- Inditex SA, Europe's largest clothing retailer, reported a 7.6 percent decline in first-half profit as Spaniards pared spending on fashion in the country's worst recession for 60 years.
Net income fell to 375 million euros ($550 million) in the six months through July, from 406 million euros a year earlier, the Arteixo, Spain-based owner of the Zara chain said today in a statement. That beat the 349.5 million-euro average estimate of six analysts compiled by Bloomberg.
Inditex, whose chains sell Oysho lingerie and Uterque leather bags, relies on Spain for 34 percent of sales, according to Deutsche Bank AG estimates. The Spanish unemployment rate will increase to almost 20 percent next year, the Organization for Economic Cooperation and Development has forecast.
"We are cautious about the economy heading into 2010 and beyond," Deutsche Bank analyst Warwick Okines wrote before the results. "We expect the Spanish economy to be a laggard." Okines has a "sell" rating on the stock.
First-half sales increased 6.6 percent to 4.86 billion euros, as the retailer added 166 stores. The average of eight analysts' estimates was 4.81 billion euros.
Inditex said in March it plans to add 370 to 450 stores this year, with 95 percent of the openings outside Spain. That's fewer than the previous year, and marks the first time that has occurred since the company's 2001 initial public offering. Capital spending for 2009 is expected to be 600 million euros.
The retailer is likely to cut the rate of its store expansion to 11 percent annually over the next five years from 19 percent on average a year between 2002 and 2009, Okines said.
Inditex rose 40 cents, or 1.1 percent, to 38.63 euros in Madrid trading yesterday. The stock has gained 23 percent this year, while competitor Hennes & Mauritz AB advanced 30 percent and Gap Inc. rose 60 percent.
Inditex's sales this year may surpass those of Gap, its larger U.S. rival, according to analyst estimates. Gap had sales of $6.37 billion in its first half, which ended Aug. 1. Inditex had the equivalent of $7.13 billion.
