Zara’s parent company Inditex has just announced a massive profit of 18% increase in the first quarter of the fiscal year. The successful sales from its global expansions helped the company entirely and thus making its profits surge to the said percentage.
On Wednesday, Inditex told reports that its net profit for the period of February to April jumped 654 million euros ($734 million) in contrast to the 554 million outcome of the previous year. Sales escalated up to 14 percent to 5.6 billion euros respectively.
According to the company, the massive boom was the result of the success of its global expansions by erecting physical and building virtual online stores, counting the four latest Zara online set ups in the South East Asian countries of Thailand, Malaysia, Singapore and Vietnam.
“Inditex continues to buck the trend of weaker growth in bricks and mortar retail and the market difficulties faced by some fashion retailers,” Analyst Jon Copestake told reports. "Part of the reason for this is the fast fashion chain's commitment to multi-channel and online strategies, with the firm expanding its online offering heavily in Asia in the last quarter.”
"Another factor is the diverse markets it has carved out a presence in and the number of brands it operates." Copestake explained further.
Yet, with the bulk of manufacturing costs are in euros, Inditex is deeply wide-open to exchange instabilities; counting reductions in the British pound, as a hefty quantity of sales are created externally from Europe.
In the first quarter, Damages on foreign exchange activities rose up to €4m in contrast to €2m of the previous year.
"With currency impacts looking broadly neutral for the remainder of the year both in terms of translation and transaction, we see a year of good earnings growth and margin increase at Inditex." Anne Critchlow, an Analyst at Societe Generale, told reports.
In terms of sales, Inditex has managed to put itself in the top tiers unlike its rivals of H&M and Forever 21. Inditex, as its strategy, is fast to adapt to the fashion trends and produce designs with originality and creativity.
Amancio Ortega founded Inditex in 1975 and has a roster of famous fashion brands such as Massimo Dutti, Zara, Bershka and Pull & Bear with all of these totaling to 7,385 physical stores operating globally.
Despite the good news, shares of Inditex were down in early trades in Spain. At the time of writing, the retail giant’s trades declined -1.14% to -0.40 which closed at 34.82 while having a short high of 35.19 and a low of 34.62.
Meanwhile, Inditex’s RSI level continued to go down to 35.42 while its Coppock Curve performed much lower to -2.09. The stock is currently in a negative region so a sell would be recommended.
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