MADRID (MarketWatch) -- Inditex posted a 17% rise in fourth-quarter profit on a 13% rise in revenue as the Spanish retailer saw strong growth in international markets and opened its fiscal year with rapid sales growth.
For the quarter ended Jan. 31, the owner (ITX) of the Zara, Pull & Bear and Massimo Dutti chains posted profit of 483 million euros ($666 million), against 410 million euros in the year-earlier period.
For 2009 as a whole, the company's profit rose 5% to 1.31 billion euros, topping analyst estimates of 1.27 billion euros.
Sales rose to 1.9 billion euros from 1.68 billion euros during the quarter, and grew 7% for the year to 11.08 billion euros, outstripping those of U.S. apparel giant Gap GPS, +0.39% on an annual basis.
Sales outside its home market of Spain, currently enmeshed in a deep economic recession, accounted for 68% of total sales in 2009, versus 66% in 2008.
Europe ex-Spain accounted for a 46% chunk of sales, against 45% in 2008, while Asian sales accounted for 12.2% of the total versus 10.5%.
Pablo Isla, chief executive of Inditex, said in a conference call that 2009 was a year of stability for Spain, with levels of sales maintained, but space growth had not increased. Spanish sales accounted for a 31.8% portion of the overall total, down slightly from 34% in 2009.
The company's same-store sales in local currencies rose 14% from Feb. 1 to March 14. The spring and summer season will be influenced by the performance over the Easter period, owing to heavy sales volumes during the period.
The company opened 343 stores in 2009. Inditex plans to open 365 to 425 new stores in 2010, with 95% of this new retail space to be located in international markets.
Within these plans, 40% of the increase in stores will take place in Asia, with two stores to be opened in India starting in May.
Priority: Europe and Asia
"Our priority is to focus growth in Europe and Asia," said Isla. "We see significant opportunities in Eastern Europe [and] the Russian Federation, and there is a great potential to expand profitably in Europe for many years, as our market share is below 1% in most countries."
He said the main areas of growth for Asia are China, Japan and South Korea. "We see huge long-term potential for Inditex in Asia markets," he said. Over the next three years, the company expects to see space growth of between 8% and 10%.
Owing to strong cash-flow generation by the group, with funds from operations up 11% in 2009, Inditex's said its board will propose a dividend of 1.20 euros per share, an increase of 14% on the previous year.
Isla was asked by analysts why they aren't paying out an even bigger portion of net income, given the group's huge cash balance. "Our main priority is to invest in the future growth of the business. We always want a high level of flexibility ... we always wanted more steady growth in the dividend, rather than big jumps," he said.
He also said that the company expected costs to grow along with its plans to open more stores.
Chairman: No. 9 on Forbes list
Inditex's success has been a boon for founder and Chairman Amancio Ortega, who ranked the ninth richest man in the world in Forbes magazine's annual list of billionaires, which was released last week. He moved up one spot from No. 10.
Shares of Inditex rose nearly 3.3% to 48.49 euros in Madrid, as many analysts appeared pleased with the results, given the tough time retailers across the globe have been enduring owing to the recession.
Analysts at Standard & Poor's said good news for shareholders was the rise in the dividend and also the fact that Inditex is relying less on Spanish markets for revenue. Cost containment, they said, helped Inditex beat expectations.
Gross-profit margin for Inditex in 2009 widened to 57.1% from 56.8%.
In a note to investors, S&P raised its target price on Inditex to 50 euros from 42 euros, but kept its hold recommendation on the group.
Analysts at Bank of America/Merrill Lynch rate the stock a buy. They see a 3% to 5% upward risk to consensus earnings estimates owing to "strong results and a good start to the first quarter." They said shares are valued at 20 times 2010 price/earnings, which is reasonable given the "sustainable mid-teens growth in earnings per share."
"We are more relaxed than most on the Spanish consumer outlook and we think Inditex's expansion into Asia and of its non-Zara formats should put upwards pressure on margins and returns over time," they said in a note to investors.
MADRID (MarketWatch) -- Inditex posted a 17% rise in fourth-quarter profit on a 13% rise in revenue as the Spanish retailer saw strong growth in international markets and opened its fiscal year with rapid sales growth.
For the quarter ended Jan. 31, the owner (ITX) of the Zara, Pull & Bear and Massimo Dutti chains posted profit of 483 million euros ($666 million), against 410 million euros in the year-earlier period.
For 2009 as a whole, the company's profit rose 5% to 1.31 billion euros, topping analyst estimates of 1.27 billion euros.
Sales rose to 1.9 billion euros from 1.68 billion euros during the quarter, and grew 7% for the year to 11.08 billion euros, outstripping those of U.S. apparel giant Gap GPS, +0.39% on an annual basis.
Sales outside its home market of Spain, currently enmeshed in a deep economic recession, accounted for 68% of total sales in 2009, versus 66% in 2008.
Europe ex-Spain accounted for a 46% chunk of sales, against 45% in 2008, while Asian sales accounted for 12.2% of the total versus 10.5%.
Pablo Isla, chief executive of Inditex, said in a conference call that 2009 was a year of stability for Spain, with levels of sales maintained, but space growth had not increased. Spanish sales accounted for a 31.8% portion of the overall total, down slightly from 34% in 2009.
The company's same-store sales in local currencies rose 14% from Feb. 1 to March 14. The spring and summer season will be influenced by the performance over the Easter period, owing to heavy sales volumes during the period.
The company opened 343 stores in 2009. Inditex plans to open 365 to 425 new stores in 2010, with 95% of this new retail space to be located in international markets.
Within these plans, 40% of the increase in stores will take place in Asia, with two stores to be opened in India starting in May.
Priority: Europe and Asia
"Our priority is to focus growth in Europe and Asia," said Isla. "We see significant opportunities in Eastern Europe [and] the Russian Federation, and there is a great potential to expand profitably in Europe for many years, as our market share is below 1% in most countries."
He said the main areas of growth for Asia are China, Japan and South Korea. "We see huge long-term potential
 for Inditex in Asia markets," he said. Over the next three years, the company expects to see space growth of between 8% and 10%.
Owing to strong cash-flow generation by the group, with funds from operations up 11% in 2009, Inditex's said its board will propose a dividend of 1.20 euros per share, an increase of 14% on the previous year.
Isla was asked by analysts why they aren't paying out an even bigger portion of net income, given the group's huge cash balance. "Our main priority is to invest in the future growth of the business. We always want a high level of flexibility ... we always wanted more steady growth in the dividend, rather than big jumps," he said.
He also said that the company expected costs to grow along with its plans to open more stores.
Chairman: No. 9 on Forbes list
Inditex's success has been a boon for founder and Chairman Amancio Ortega, who ranked the ninth richest man in the world in Forbes magazine's annual list of billionaires, which was released last week. He moved up one spot from No. 10.
Shares of Inditex rose nearly 3.3% to 48.49 euros in Madrid, as many analysts appeared pleased with the results, given the tough time retailers across the globe have been enduring owing to the recession.
Analysts at Standard & Poor's said good news for shareholders was the rise in the dividend and also the fact that Inditex is relying less on Spanish markets for revenue. Cost containment, they said, helped Inditex beat expectations.
Gross-profit margin for Inditex in 2009 widened to 57.1% from 56.8%.
In a note to investors, S&P raised its target price on Inditex to 50 euros from 42 euros, but kept its hold recommendation on the group.
Analysts at Bank of America/Merrill Lynch rate the stock a buy. They see a 3% to 5% upward risk to consensus earnings estimates owing to "strong results and a good start to the first quarter." They said shares are valued at 20 times 2010 price/earnings, which is reasonable given the "sustainable mid-teens growth in earnings per share."
"We are more relaxed than most on the Spanish consumer outlook and we think Inditex's expansion into Asia and of its non-Zara formats should put upwards pressure on margins and returns over time," they said in a note to investors.