Inditex first-half earnings beat forecasts

Galicia-based fashion retailing giant Inditex beat analysts’ forecasts for its net profit in the first half of its financial year, rising 1 percent to 951 million euros as sales increased 6 percent to 7.655 billion.

The improvement was achieved despite a fall in sales in Spain and the fact that its leading brand Zara grew less than other brands. Net profit was boosted by a fall in corporate taxes from 320 million euros to 264 million. The company said the drop in taxes was not related to an increase in internet sales, a part of which is billed in Ireland, which has a low corporate income tax rate. The company gave a breakdown of its taxes per country to demonstrate it is not using so-called financial engineering to ease its tax burden.

Net profit was higher despite a fall of 1.5 percent in net operating profit to 1.129 billion euros. Asia this year has become the main driver of the growth in the company’s sales. Europe, excluding Spain, saw sales rise 10 percent, accounting for 4.6 percent of total revenues. Growth in the Americas slowed somewhat. Spain now accounts for only 19.3 percent of total sales.

At the end of the first half of its financial year, Inditex had 6,104 outlets in 80 different countries, 1,770 of which were under the Zara brand.

Like-for-like sales grew 2 percent in the first half. Sales in at constant exchange rates in the period August to mid-September were up 10 percent from a year earlier.