Inditex launches Zara in New Zealand

Inditex, the world’s biggest fashion group, is launching its flagship store Zara in Auckland New Zealand next month.

In September the company opened a Zara branch in Ho Chi Minch city, Vietnam, which had a ‘strong’ customer response. The company will also launch its online sales in Turkey in October.

The Spanish multinational clothing company also owns Zara Home Massimo Dutti, Bershka, Oysho, Pull and Bear, Stradivarius and Uterqüe.

The firm opened new stores in 38 markets in the first half bringing the firm’s total number of stores up to 7096 in 91 markets on 31 July 2016.

The group’s sales in local currencies grew 16% in the first half. Both net sales and like for like sales grew 11%, with net sales at €10.5bn.

Majority of the group’s net sales came from Zara at €6.9bn, which grew 13% compared to the previous period followed by Berskha (6%) at €893m and Massimo Dutti (8%) at €720m.

The group’s regional sales came mostly from Europe (excluding Spain) at 43% followed by Asia at 25%, Spain at 17% and America at 15%.

Gross profit was 9% higher at €5.9bn, however gross margin fell to 56.8% from 58.1% in the previous period. Analysts at RBC Capital Market expect this to stabilise in the second half as dollar sourcing headwinds ease and their pricing surveys suggest the company’s pricing is stable in Autumn.

Operating expenses also grew by 9% as a result of additional new retail spaces and the variable costs linked to the sales performance.

Earnings before interest, tax, depreciation and amortisation (EBITDA) edged up 7% to €2.1bn.

Cash and cash equivalents fell to €3.5bn from €4.1bn in 2015 and financial debt has increased from €10m to €126m. RBC Capital Market expects cash flow to improve as it gradually shifts its expansion focus from new space to online development which should lead to upwards pressure on forecasts.

Capital expenditure in the full year is expected to be €1.5bn.

RBC Capital Market analyst Richard Chamberlin said: “We remain positive on Inditex as we view it as a "stable grower" which is a poor macro proxy and expect it to continue to take life for like share in fragmented apparel markets worldwide, on account of its strong multichannel offer and its superior ability to respond to trends in season.”

The dividend was set at €0.30 per share and earnings per share rose to €0.404 compared to €0.375 in the previous period. The share price fell 1.04% to €32.33 at 1109 BST on Wednesday.