Inditex SA, Europe's fastest-growing clothing retailer, plans to boost its number of stores by about 75 per cent to 4,000 by the end of 2009, overtaking Gap Inc's current total, as it expands the Zara chain in Europe, the United States and Asia.

The company, based in northwest Spain, may open as many as 360 stores this fiscal year, almost one a day, as it plans to boost its selling space by as much as 20 per cent, Chief Executive Officer Jose Maria Castellano said on Thursday.

Inditex is expanding faster than Gap, the largest US clothing store chain. The Spanish company has a market value of about US$18.9 billion compared with Gap's US$18.8 billion, even though it has a third as many employees and half as much revenue. That is a sign that investors expect more profit growth from Inditex, said Ofelia Marin, an analyst at Banca March SA in Madrid.

"It's a company with a very attractive business model," said Javier Kessler, a money manager at Capital@Work International SGC, which has about 2.2 billion euros (US$2.9 billion) in funds and private accounts. "It's aggressive, and they'll need to maintain healthy sales and profit growth to keep costs in line," said Kessler, who advises investors to hold the stock.

San Francisco-based Gap had 2,994 stores at the end of January and expects to increase its space by 2 per cent this year. Inditex's growth is also outpacing that of Hennes & Mauritz AB, Europe's biggest clothing-store chain, which is boosting its store count by as much as 15 per cent a year.

Inditex increased its total retail space by 19 per cent last year to 1.18 million square metres. It is opening bigger Zara stores now, with the average size at 1,289 square metres, larger than the average Gap store.

Inditex's average store size, 524 square metres, is about half that of Gap's. The US retailer's average size is 1,135 square metres.

Shares of Inditex rose 32 euro cents (42.2 US cents), or 1.4 per cent, to 23.39 euros (US$30.83) in Madrid, having touched a one-year high of 23.91 euros (US$31.51) on March 7. They have gained 6.8 per cent this year, while Gap has increased 2.1 per cent.

"Inditex will continue to grow at much higher levels than the sector average," wrote Jorge Palacios, an analyst at ING Financial Markets in Madrid who has a "buy" rating on Inditex.

Inditex said that fiscal fourth-quarter profit rose 43 per cent to 231.1 million euros (US$300 million) after the company opened additional stores and offered fewer discounts. Analysts had expected profit of 204 million euros (US$268.9 million).

The company also said its full-year gross profit margin, a measure of profitability, rose to a record 53.5 per cent, beating its own target of 52.6 per cent. Gap's gross margin for the same period was 39.2 per cent.

The Spanish retailer plans to have stores in about 70 countries by 2009, which means it will enter about 14 new markets.

The Spanish company will focus its expansion on the Zara format in Europe, where it plans to maintain 80 per cent of its business. Still, the chain will keep expanding gradually in the United States, with five to six openings a year, and in Asia, Castellano said.

Inditex said it plans to expand its Massimo Dutti, Bershka and Pull & Bear chains throughout Europe. Massimo Dutti sells office wear, while Bershka sells clothes for teenage girls. Pull & Bear sell basic items.

Inditex stores had average revenue of 448 euros (US$590.50) per square foot in the past fiscal year, while Gap had average revenue of US$445 per square foot. That is based on both retailers' total space at the end of their fiscal years.

Castellano has doubled the retailer's store count since its May 2001 initial public offering. Now Inditex is looking for a new CEO to do it again. Inditex is ruling out any acquisitions over the next five years, and it will focus its growth through expanding its current eight formats.

"It'll be difficult to improve the track record," said Banca March's Marin.

The retailer's other chains - Oysho, which sells lingerie, Kiddy's Class, which sells children's wear, Zara Home, which sells towels and cutlery, and Stradivarius, another line for girls will focus their expansion on countries such as Spain and Portugal, Castellano said.

Inditex plans to appoint six managing directors and the new CEO this year, Castellano said, adding that he will no longer be responsible for day-to-day management or the long-term strategy.

The six managing directors will each be focused on one specific function logistics, finance, expansion, real estate, human resources and computer systems, Castellano said.

(China Daily 04/04/2005 page12)