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Inditex's quarterly sales grow at a good pace: 14 percent YoY

The global street fashion giant continues to grow and does so at a good pace: its first quarter fiscal results for the current year (February-April) showed a 14 percent increase in total sales over the same quarter of the previous year.

From February to April 2017 Inditex sold a total of 5,569 million euros, catapulting its net profit for the quarter in question to 654 million euros, an increase of 18 percent year-on-year.

Market sources note that the textile group founded by Amancio Ortega met the expectations of analysts and investors. Online sales have attracted particular attention, with Renta 4 analyst Ivan Sanfélix emphasising the fact that Inditex has managed to increase its turnover by more than 10 percent for ten consecutive quarters.

In this regard, Inditex president Pablo Isla assured at the analysts conference held after the financial release that the company has "satisfactory" grown its sales during this first quarter and argued that the integrated model of physical and online stores offers the group "significant growth potential over the next few years."

Inditex, 10 years of sustained sales growth in the first quarter

Data compiled by the Business Intelligence unit of FashionUnited shows how sales, revenues and profits of the Galician textile giant have maintained steady growth in the last decade, going from the 2.039 million euros registered by the group in the first quarter of 2017 to 5,569 million euros in the same period of the current fiscal year.

The graph shows the year-on-year performance of Inditex revenues and profits in the first quarter, from 2007 to 2017.

Spain remains a key and future market for Inditex

"The business in Spain is still very healthy and we are very active in this market with important openings," said Isla in his talk with analysts.

But it is not the only market that offers growth possibilities: Inditex continues its plan to expand into new markets and has opened stores in 30 markets during this first quarter, closing April with a total of 7,385 stores in 93 countries. "All the brands of the group have increased their international presence through its integrated platform of physical and online stores," Inditex said in a statement. During the quarter, four new online markets were incorporated, with the opening of the Zara virtual store in Thailand, Malaysia, Singapore and Vietnam.

First quarter growth, good indicator for the rest of the year

Analysts polled by Bloomberg agree: Inditex will maintain the good pace of the first quarter of its fiscal year. These experts expect the fashion group to generate a net profit in line with the positive developments in 2016, when it grew 6 percent in the first quarter and 10 percent in the full year.

Likewise, the analysis department of Sabadell bank predicts that the net profit of Inditex will stand at 661.52 million euros, 19.4 percent more than in the first quarter of 2017. On a similar note, analysts at Bloomberg expect the group's profits to rise 18.2 percent to 654.6 million.

Meanwhile, Inditex shares remain the favorites of Madrid's trading floor. The fashion group has a market value of 111,763 million euros, the largest of the listed companies in the country. Following the release of the results for the first quarter, the stock closed at 35.86 euros. "Inditex continues to be a value we like have in the portfolio as it presents several strengths, including the quality of its accounts: Its debt is negligible, its average sales growth is double digit and has a growing cash generation," explained from Bankinter. Sanfélix from Renta 4 explains on the other hand that the fall in value in the park on Wednesday last week was due to the "very high multiples that are quoted" and to the profit taking by certain investors.

However, some voices have pointed to a certain "slowdown" in the start of the second quarter. "We believe this may weigh on the short-term price," warned from RBC Capital Markets in a note to market.

Image: Zara facebook