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Zara owner Inditex beats Q1 profit forecasts

Spains Industria de Diseño Textil SA, the worlds largest clothing retailer, reported on Wednesday better-than-expected first-quarter profit amid sales growth in all geographies, boosted by a weaker euro and a continued global expansion of stores.

The owner of brands such as Pull&Bear, teen chain Bershka and up-market chain Massimo Dutti, said that sales rose by an annualized 17% in the quarter ended April 30th to €4.37 billion, slightly ahead of projections for €4.33 billion. On a currency-neutral basis, store and online sales were up 13% in local currencies.

Gross profit jumped 18% to €2.6 billion from €2.21 billion in the first quarter of 2014, with the gross margin edging up to 59.4% from 58.9%. Net profit soared 28%, the most in more than two years, to €521 million, topping analysts projections for a jump to €505 million from €406 million a year earlier.

Marcos López, Inditex’s capital markets director, said the results “reflect a very strong operating performance with positive like-for-like sales growth in all geographies.”

Inditex said space growth and online launches for FY2015 are on track, having opened 63 new stores in 27 countries in the first quarter of the year, and is planning to launch online sales in Taiwan, Hong Kong and Macau this year.

About a third of the openings were Zara Home stores, the groups home furnishing brand. “We are very pleased with its performance,” said Chief Executive Pablo Isla. “It is very well received in all our markets.”

The Spanish group operated a total 6 746 stores in 88 markets as of the end of the first quarter, it said, with new store openings having averaged 400 over the past five years.

The clothing retailer also reported that store and online sales increased by a currency-neutral 13.5% between February 1st and June 7th 2015, compared with an 11% growth in 2014.

Societe Generale analyst Anne Critchlow, who rates the stock a “buy”, said, cited by Reuters, that underlying trading remains very strong at Inditex and estimated that like-for-like sales grew by 6.5% in the first six weeks of the second quarter, compared with a 5.3% jump in Q1.

Industria de Diseno Textil SA traded 1.98% lower €29.40 per share at 09:41 GMT in Madrid, marking a one-year jump of 33.33%. The group is valued at €92.38 billion. According to the Financial Times, the 30 analysts offering 12-month price targets for Inditex SA have a median target of €29.20, with a high estimate of €36.00 and a low estimate of €20.00. The median estimate represents a 2.65% decrease from the previous close of €30.00.

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