Inditex China Business Will Have Strong Growth Potential

ZARA's parent company, Inditex, the world's largest apparel retailer, recently announced its third quarter earnings. Its net profit was 759 million euros ($984 million 600 thousand), an increase of 5% over the same period last year as a result of the expansion of physical stores and new online businesses. The net sales volume was 4 billion 620 million euros (6 billion US dollars), up 8.3%.

Pablo Isla, chief executive of Inditex, said that the business carried out in China was very successful. The combination of new stores, online stores and Tmall increased their potential for growth.

Inditex Pablo Isla, chief executive officer, told analysts. "We are glad that our sales have evolved. We have positive expectations for all different regions and will continue to see significant growth opportunities for Inditex group worldwide. The current foundation is enough to cope with the huge growth potential in the future.

Although he refused to provide specific explanations for the third quarter improvement, he pointed out that in the future, the growth rate of capital expenditure will be lower than that of shopping space, and the spatial growth should be on the right track, and in the long run, it should remain within the range of 8% to 10%.

In addition, physical stores and online sales increased by 14% between November 1st and December 8th and recorded a 10.5% increase in the first nine months of the fiscal year, suggesting that sales growth will accelerate in the fourth quarter.

Inditex group's brand also includes Bershka, Oysho, Massimo Dutti, Pull & Bear and Stradivarius. According to fashion headlines, it has invested huge sums in expanding, renovating, logistics and information technology. In the first 9 months of this year, it opened 230 stores in 50 countries, including Massimo Dutti in Austria, Stradivarius in Britain, Pull & Bear in Philippines.

In addition to the expansion of physical shops, Inditex group has expanded its online footprint, releasing online sales websites in South Korea and Mexico respectively.

Facing the key development of China's market, its brand ZARA It opened 8 stores and the official online store that opened Taobao mall. Among them, the East Nanjing road in Shanghai also launched the world's largest flagship store.

"We are China The business has been very successful, and we are delighted to see this new store opening, online store and Tmall increase. We see strong growth potential. " Pablo Isla, chief executive of Inditex, said.

Besides, Zara is in New York, 500 Fifth Avenue. Flagship store The renovation will be reopened in March. Inditex group said that the new distribution facilities in Spain Cabanillas have been running at full capacity and equipped with RFID inventory management technology for ZARA stores, making it easier to re order popular products.

In the first nine months, compared with 59.9% in the same period last year, its gross profit margin, a key indicator of profitability, dropped to 58.9%. Isla said the profit margin is expected to be "basically stable" in the second half of 2014.

Bernstein research company predicted that sales in the third quarter increased by 5.6%, making a 6.4% contribution by 2.7% of the negative impact of exchange rate and the growth of space. "Strong growth in sales reflects the strength and speed of business models. Inditex can respond to adverse conditions like a mild climate," Bernstein research firm said. In addition, we see through current transactions that sales growth is accelerating and is conducive to the fourth quarter. "

At the time of the deadline, Inditex shares rose 4.2% to 23.30 euros (about 29.38 US dollars) on the Madrid Stock Exchange.