StockBeat: Zara Owner Inditex Is Back in the Groove

StockBeat: Zara Owner Inditex Is Back in the Groove

StockBeat: Zara Owner Inditex Is Back in the Groove
Stock Market
Wednesday, June 12, 2019 - 08:36

By Geoffrey Smith

Investing.com -- The world’s largest fashion retailer is back at the top of its game.

Inditex (MC:ITX), the Spanish-based owner of Zara, Massimo Dutti and Pull & Bear, said Wednesday it will raise its dividend pay-out after a strong quarter in which it increased sales in all of its brands and all of its geographies.

The company said it’ll propose paying out 60% of net profits in future, up from 50%. It’s also going to propose a special bonus dividend of 1 euro a share for the fiscal years 2018-2020.

The move reflects a degree of confidence in the balance sheet that seemed unlikely a couple of quarters ago, when the company was struggling with its multi-channel strategy and with the effects of a freak summer in Europe that had customers putting off purchases of autumn and winter gear.

However, the group looks in much better shape today. Net profit was up 10% on the year to €734 million in the three months to April, while sales were up 5.9%. The company upheld its forecast of 6% comparable sales growth in the fiscal year. More than anything, that’s due to the smooth roll-out of online stores worldwide, which has protected it from the worst of the woes affecting bricks-and-mortar chains. The company launched Zara in Brazil in March, a swathe of further openings across the Middle East and North Africa and Indonesia followed in May.

The shares were up 0.5% on the news and are now up 13.5% in 2019. That’s on a day when Europe’s bourses were shaken by another bout of risk aversion against the backdrop of the U.S.’s various trade-related disputes. Spain’s IBEX 35 was down 0.3%, while the benchmark Euro Stoxx 600 was down 1.8 points, or 0.5% at 379.04 by 4:30 AM ET (0830 GMT). The U.K. FTSE was down 0.3% and Germany's Dax down 0.6%.

Elsewhere, one of Inditex’s fast-fashion smaller rivals, U.K.-listed boohoo.com (LON:BOOH), also posted another strong set of quarterly results, with revenue up 39% and its gross margin stable at 55.0%. The company didn’t raise its conservative full-year guidance of 25%-30% sales growth however. The shares also came after pressure after news of a lawsuit against founder Mahmud Kamani from a web designer who claims he was promised a 10% stake in the company in return for designing its all-important website. Kamani has dismissed the claims as “without merit”.

© Reuters.
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