* Plans to keep up rate of expansion in China
* Nine-month net profit up 27 pct, broadly in line
* Reduces exposure to crisis-hit Spain, Europe
By Sarah Morris and Sarah White
MADRID, Dec 12 Zara owner Inditex plans
to keep up the pace of expansion in China and strengthen its
global online business as the Spanish home market becomes ever
less important for the world's largest clothing retailer.
The brainchild of Spain's richest man, Amancio Ortega,
Inditex has more than 6,000 stores across some 86 countries and
has been opening them at a pace of about five per month in China
since 2006 to serve the rapidly growing middle class.
"We see that continuing for a few years," Capital Markets
Director Marcos Lopez told Reuters in a telephone interview on
Wednesday after Inditex posted a 27 percent rise in nine-month
net profit to the end of October.
Inditex still makes 20 percent of its sales in Spain, but
customers are being squeezed by the second recession in three
years with one in four workers jobless. Inditex said it would
not put up prices in response to the rise in value added tax
from September, potentially affecting profitability.
Meanwhile, Inditex has already opened 72 stores in China in
the nine-month period, bringing its total there at the end of
October to 347 and helping to lift net profit to 1.65 billion
"The combination of accelerated store openings in the
higher-growth Asian and emerging markets and the rollout of the
group's online capability should continue to deliver GDP-plus
Inditex like-for-like sales growth," said Citi in a note.
China's upper middle class, with average household earnings
of $40,000 a year, could grow by 2020 to 280 million people -
nearly six times Spain's current population, according to Boston
Inditex opened 360 stores globally in the nine-month period,
increasing sales by 17 percent to 11.4 billion euros.
Inditex only ventured online in 2010. It launched its
flagship Zara brand online in China in September and said on
Wednesday it would start internet sales in Canada in the first
half of 2013.
Without the debt of many Spanish companies, Inditex has
fared better than many rivals in the downturn and analysts
widely believe it has taken market share locally from more
expensive brands and independent stores forced to shut.
Lopez said Spanish market share was as high as 12 percent
for its eight brands, ranging from flagship Zara to teen brand
Bershka. A production model that can turn designs from
sketchbook to store within a fortnight has given it another
Core profit - or earnings before taxes, interest,
depreciation and amortisation (EBITDA) - rose 25 percent to 2.78
Inditex trades at 23 times forecast 2012 earnings compared
with rivals H&M at 19 times and GAP at 12.
H&M's sales for November are expected to shrink again after
a surprise drop in October, a Reuters poll showed.
Inditex shares, which have risen 65 percent in 12 months,
were up 0.2 percent at 1349 GMT to 103.8 euros.