Spains Inditex, owner of mid-market fashion chain Zara, reported flat net profit for 2008 on Wednesday but pleased investors with an upbeat outlook for this year, pushing its shares as much as 7 percent higher. Europes biggest clothing retailer said it aimed for an increase in sales in 2009 at its existing stores which total more than 4,000 in 73 countries, despite a grim sales environment as shoppers cut back in the global downturn.
"Our target at this stage of the year is to have positive like-for-like sales growth," Inditex Chief Executive Pablo Isla said in a conference call. "At the same time, we are aware that the environment is challenging," he added. Inditex, which also owns label Massimo Dutti, reported net profit of 1.25 billion euros ($1.7 billion) for the year to end-January, almost flat on last year and close to the 1.23 billion forecast in a Reuters poll of nine analysts.
Shares rallied on the forecast to trade as much as 7.9 percent higher before receding to trade up 3.9 percent at 27.78 euros by 1249 GMT, still outperforming a flat sector. The stock had fallen 15 percent in March on concerns about exposure to recession-bound Spain, which accounts for a third of its business.
"The stock has been trading at a discount to its main peer H&M over recent days. The results this morning have shown that it remains a quality stock to buy into," said one Madrid-based trader. Both Inditex and arch-rival H&M of Sweden are weathering a severe economic downturn better than many other clothing retailers, thanks to their offering of high-fashion looks taken straight from the catwalks at low prices.
Debt-free Inditex said local currency sales in February were up 9 percent. Anne Critchlow, analyst at Societe Generale, said this was reassuring, translating into same-store sales down between 1 and 3 percent in a difficult month for retailers. Sales rose 10 percent to 10.41 billion euros, thanks to aggressive growth including first stores in Ukraine and Egypt.
However, predicted store expansion was less than expected, striking a negative note, said Societe Generales Critchlow. She said she had expected openings of around 570 stores in 2009 against a company forecast range of 370 to 450 stores.
Inditex said it would pay an unchanged dividend of 1.05 euros per share. The fact the cash-generative company had not raised its dividend was a reflection of thorny times, some said. "Inditexs dividend payout ratio has remained at 52 percent despite its strong net funds position, reflecting Inditexs desire to preserve cash in the current tough environment," said J.P. Morgan analyst Richard Chamberlain.
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