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Inditex Q1'19 earnings beat estimates, but sales miss

Fast-fashion retailer Industria de Diseño Textil SA, also known as Inditex, on June 13 reported first-quarter earnings for fiscal 2019 ahead of expectations as its profit margin expanded and it maintained a tight grip on costs, although sales fell short of estimates.

For the three months ending April 30, the Spanish owner of the Zara apparel chain reported that earnings per share edged up to 21.4 euro cents from 21.0 cents in the year-ago period, outpacing the S&P Capital IQ consensus estimate for normalized EPS of 20 cents.

Net income for the fiscal first quarter climbed to €668 million from €654 million, while operating income rose to €851 million from €834 million. Operating margin gained 10 basis points year over year to 15.1% from 15.0%.

Cost of sales declined to €2.326 billion from €2.329 billion, even though its store count increased to 7,448 from 7,385, and during the quarter it launched online sales for Zara in Australia and New Zealand. Inditex said it continued differentiating, optimizing and upgrading its store portfolio.

Sales increased to €5.65 billion from €5.57 billion, a rise of 2%, or 7% in local currencies. However, that was below the S&P Capital IQ consensus estimate of €5.79 billion. In the first quarter of fiscal 2017, sales had jumped 14% year over year.

In a trading update for the fiscal second quarter ending July 31, Inditex said sales between May 1 and June 11 had increased 9% in local currencies.

Inditex Chairman and CEO Pablo Isla said in a statement: "The strength of the integrated store and online model, bolstered by continued innovation, is driving solid growth and notable job creation."

The company, which is based in Arteixo, Spain, did not quantify the number of jobs it added. Its website says it has 171,839 workers.

Inditex, which also owns the brands Pull&Bear, Massimo Dutti and Bershka, indicated that it had seen growth across all regions, without providing specifics.

It added that it had finalized the expansion of its head office in Arteixo in May and that a new distribution center in A Laracha, Spain, was set to start operations during the summer.

In late-morning trading in Madrid, Inditex's shares were down 39 cents, or 1.4%, at €28.53.