Slowdown takes toll on Inditex

Inditex SA, Europe's largest clothes retailer, reported its smallest profit increase in four years after sales growth slowed at the Zara chain.

Net income climbed 10 percent to 219 million euros in the first quarter through April from 200 million euros a year earlier, the Arteixo, Spain-based company said yesterday.

Inditex added its first shops in South Korea and Ukraine this year as higher living costs cause demand to weaken in Spain, where the retailer gets more than a third of its revenue and has almost half its stores. Consumption also is slowing elsewhere in Western Europe and in the United States, which caused a 14 percent slide in competitor Gap Inc's same-store sales last month.

"Definitely they're going to feel a slowdown in the market," Peter Wallin, an analyst at Kaupthing Bank in Stockholm, said of the company's Spanish sales before the figures were released. He advises buying Inditex stock.

First-quarter sales advanced 9 percent to 2.22 billion euros, the least since Inditex's initial stock sale in 2001, according to Bloomberg data. Revenue increased 12 percent excluding currency movements, less than the 17 percent climb in the period's first seven weeks.

Inditex fell 30 cents, or 1 percent, to 31 euros in Madrid trading yesterday. The stock has dropped 26 percent this year, more than declines of 15 percent by Stockholm-based Hennes & Mauritz AB and 17 percent by US firm Gap.

Sales excluding currencies rose 14 percent from a year earlier between Feb 1 and June 8, Inditex said. Spanish revenue was "slightly below average" in that span, Marcos Lopez, director of capital markets, said in a telephone interview. Sales are meeting managers' forecast in the current quarter, he said.

The timing of Easter, which fell in March this year instead of April as in 2007, led to a slowdown in the second part of the first quarter, Lopez said.

Agencies

(China Daily 06/12/2008 page16)