Increased sales outside Spain help boost Inditex profit

Inditex SA, the world s largest clothing retailer, said first-quarter profit jumped 63 percent, beating analyst estimates, as the company increased sales outside its home market of Spain.

Net income in the three months through April increased to 301 million euros ($359 million) from 184 million euros, the Arteixo-based company said today. Profit exceeded the 250 million-euro estimate of seven analysts surveyed by Bloomberg.

Inditex, the owner of eight store formats including Zara and Massimo Dutti, is opening outlets abroad to reduce reliance on Spain, which accounts for about one-third of revenue. Zara will start online sales in six countries on Sept. 2, the retailer said today. Inditex operated in 76 countries at the end of April compared with 73 a year earlier and said more than 40 percent of its new store space is being added in Asia.

Emerging-market growth and the launch of its online business this autumn will drive above-consensus top-line and earnings growth in fiscal 2011, Karen Howland, an analyst at Barclays Capital in London, said today in a research report.

Inditex rose as much as 2.32 euros, or 5.3 percent, to 46.20 euros in Madrid trading. The stock has advanced 6.6 percent this year, while Stockholm-based competitor Hennes & Mauritz AB has gained 12 percent and San Francisco-based Gap Inc. has increased 0.9 percent.

Inditex s gross margin widened to 59.9 percent from 56.9 percent a year earlier, also beating analyst estimates. Inventory management, the use of sourcing in proximity to respond to sales growth and a positive currency impact, led to the gross margin gain, the retailer said.

Hennes & Mauritz, Inditex s nearest rival in Europe, on April 8 reported a 40 percent increase in net income and a gross margin of 62 percent, helped by efficiencies and bargaining power with its suppliers. H&M buys its goods from about 700 independent suppliers, mostly in Asia and Europe.

Inditex has said a significant proportion of its production takes place in the group s own factories. All apparel is received at the retailer s logistical centers for each chain in Spain, from where it is distributed to stores worldwide.

First-quarter revenue rose 14 percent to 2.67 billion euros after the retailer added 98 stores, bringing the total to 4,705. In-store sales measured at a constant exchange rate climbed 13 percent in the period between Feb. 1 and June 7, it said.

Zara, which sells women s raincoats for less than $90, opened its first outlet in India on May 28 with a store in New Delhi, and plans to set up three more locations in the country this year.