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Zara owner Inditex posts 14% rise in fiscal Q3 net income, beats expectations

Industria de Diseño Textil SA, owner of the fast-fashion chain Zara, on Dec. 11 delivered fiscal third-quarter earnings that beat expectations and maintained its guidance for sales growth for the year.

Inditex, as the company is known, reported that net income in the three months to Oct. 31 rose 14% year over year to €1.2 billion, outpacing a mean consensus estimate of €1.14 billion, according to data compiled by S&P Global Market Intelligence.

In the first nine months of the fiscal year, net income attributable to the controlling company increased 12% to €2.72 billion from €2.44 billion. Earnings per share climbed to 87.4 cents from 78.3 cents.

EBIT jumped to €3.55 billion from €3.07 billion as EBIT margin rose to 17.9% from 16.7%. The strong operating performance boosted Inditex's net cash position at Oct. 31 by 17% year over year to €7.73 billion from €6.61 billion.

Net sales during the first nine months increased 7.5% to €19.82 billion from €18.44 billion.

Management stuck to its estimate of like-for-like sales growth of 4% to 6% in the fiscal year ending Jan. 31, 2020.

Executive Chairman Pablo Isla said the performance confirms the company's strategy and demonstrates "solid growth being delivered by our integrated stores and online model, thanks to our focus on the highest quality locations, store environments, products and customer experience both in stores and online."

The Spanish retailer, whose brands include Pull&Bear, Massimo Dutti, Bershka and Stradivarius, said it opened stores in 41 markets in the first nine months of the fiscal year. This brought the total number of stores to 7,486 across 96 markets. Zara opened online stores in South Africa, Ukraine, the Philippines and Colombia. It also opened its first international for&from store in Italy during the period.

Inditex forecasts about €1.4 billion in ordinary capital expenditure in fiscal year 2019, mainly driven by the addition of new space in prime locations. Ordinary capital expenditure is expected to grow below space growth in the coming years, it added.

On Nov. 4, the company paid a final ordinary and bonus dividend of 44 cents per share for fiscal 2018, bringing the total dividend for the year to 88 cents per share.

Inditex also announced the appointment of French entrepreneur Anne Lange to its board. Lange's appointment will be ratified during the company's annual general meeting in 2020, it said.

In mid-morning trading in Madrid, the company's shares were up 26 cents, or 0.9%, at €28.88.