Zara owner Inditex shares wobble as strong Euro weighs on margin

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Wold's Biggest Zara Store Opening Preparations in Madrid
Sales improved across all brands (Source: Getty)

Zara's owner Inditex reported another year of growth this morning, but its margins were squeezed as a result of the stronger euro.

Shares in the Madrid-listed company, which also owns other brands including Massimo Dutti and Pull & Bear, were down more than two per cent at the time of writing.

The figures

Net sales grew nine per cent to €25.3bn (£22.4bn) while like-for-like sales were up five per cent.

Earnings before interest and tax (EBIT) reached €4.3bn, an increase of seven per cent.

A dividend of €0.75 is proposed, 10 per cent higher than the prior year.

But gross margin was 56.3 per cent of sales, compared to 57 per cent.

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Why it's interesting

Analysts put the reduction in gross margin down to the recent strength of the euro, but said the company still had a strong growth trajectory.

"Looking beyond the short-term, we expect the group's strong growth track record to continue, supported by its best-in-class supply chain, competitive fashion offer and the remaining global opportunity, including online," said Liberum analysts.

Meanwhile, UBS analysts said the bonus dividend was lower than expected.

What Inditex said

The company said current trading was up nine per cent in the run-up to the crucial Easter trading period.

Inditex expects 350-400 new openings this year, and estimated that it will cost €1.5bn to add new space in primary locations.

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