(Corrects first and second paragraph to show sales growth, not
sales, fell in the third quarter and recovered in the fourth)
* 9-month sales up 9.5 pct
* 9-month profit up 10.4 pct
* Update on Christmas sales and 2012 awaited
By Sarah Morris
MADRID, Dec 14 Sales growth at Spain's
Inditex, the world's largest clothing retailer and
owner of the popular Zara label, eased in the third quarter as
the euro zone debt crisis rattled shoppers and unseasonably good
autumn weather altered spending patterns.
But the company, founded by Spain's richest man Amancio
Ortega, still cheered the market with evidence it remains
capable of outperforming rivals. The group reported a surprise
100 basis point increase in its profit margin and said sales
growth in the fourth quarter had recovered.
At 1103 GMT Inditex's shares were up 4 percent at 64.17
euros compare to the European retail sector, which was flat
Inditex, whose brands include upmarket Massimo Dutti, teen
clothes label Bershka and underwear stores Oysho, posted a 9.5
percent rise in sales for the third quarter ended Oct. 31,
compared with a more robust 12 percent rise in the first half.
"Third quarter results were a very mixed bag," said Liberum
Capital in a note to clients. "Profits were slightly above
consensus...Sales were notably weaker than we had expected."
Rising prices, muted wage growth and swingeing austerity
measures have squeezed disposable incomes in Europe, where
Inditex makes almost three-quarters of sales. Consumer
confidence in the 27-nation European Union (EU) sunk to its
lowest level this year in October.
Inditex said the first six weeks of the fourth quarter had
seen a return to its normal growth, with local currency sales up
11 percent, after unseasonably good weather in autumn altered
normal sales patterns.
"As weather patterns have returned to normal so have sales,"
Marcos Lopez, Inditex's Director of Capital Markets told Reuters
in a telephone interview, saying the firm had also been affected
by exchange rate factors.
Analysts took reassurance from the company's surprising
gross margin performance. It rose 100 basis points, bucking the
market's expectations it would fall. "In this environment that's
astonishing," said Societe Generale analyst Anne Critchlow.
Inditex shares have outperformed European stocks as a whole
by some 14 percent though the last six months.
During a conference call, Inditex declined to give much
detail on why the gross margin had risen, saying it would give
more information when it reported its full-year results.
So far in the crisis, Inditex has held up better than rivals
at home in Spain and abroad. It has taken market share in its
domestic market, expanded aggressively into new markets like
Asia and controlled costs through an adaptable production model.
Its "fast fashion" model enables it to get affordable
versions of catwalk fashion into stores within two weeks.
Retailers have discounted heavily during the Christmas
period. Spain's largest department store El Corte Ingles on
Wednesday advertised a 30 percent sale on some clothes until
Inditex has played down fears of price wars and said it
expected a stable performance in home market Spain this year,
but some analysts fear cutting prices could be inevitable.
"Their inventory position is up 25 percent year on year and
in local currency terms sales are only up 11 percent in the
quarter to date so the inventory is running ahead of the sales
growth and that might suggest they need to do a bit of markdown
in Q4," said Societe Generale's Critchlow.
Inditex posted nine-month sales of 9.71 billion euros, just
below the 9.8 billion euro average in a Reuters poll of 10 banks
and brokerages. Net profit of 1.30 billion euros compared with a
1.28 billion euro forecast.
Inditex's Lopez said the company's dividend policy was
stable. "As long as net income increases and as you see we keep
on increasing our net income, this (dividend rate) is more or
less guaranteed," he said.
($1 = 0.7567 euros)
(Editing by Jodie Ginsberg)