June 14, 2017 / 5:22 AM / 2 years ago

Zara-owner Inditex's sales may be slowing after upbeat first quarter

MADRID (Reuters) - Inditex (ITX.MC), the world’s biggest clothing retailer and owner of the Zara brand, stretched its lead over rivals like H&M (HMb.ST) with an 18 percent rise in first-quarter profit, but saw sales growth slow slightly in recent weeks.

The Spanish company, which also owns younger fashion chain Pull&Bear and upmarket label Massimo Dutti, said net profit totalled 654 million euros (575.38 million pounds) for its first quarter that ended on April 30, in line with analysts’ forecasts.

Earnings before interest, tax, depreciation and amortisation (EBITDA) were 1.1 billion euros, up 17 percent year-on-year and above estimates.

Inditex has consistently outperformed H&M and other rivals in the past few years as a result of its online growth and fast-fashion model that allows it to whistle the latest trends from the runway into stores within days.

Its shares have rallied 13 percent in the past three months as analysts expect the retailer to benefit from a more positive currency environment this year.

However, its shares slipped 1.4 percent to 35.35 euros on Wednesday, lagging Spain's blue chip index Ibex .IBEX, after Inditex said its local currency sales rose by 12 percent from Feb. 1 to June 3, slowing from 14 percent growth between Feb. 1 and April 30.

Close to half of the company’s 7,385 stores, operating in 93 markets, report their earnings in currencies other than the euro.

“Current trading looks to have slowed somewhat since the start of the second quarter ... We think this may weigh a little on the share price in the short term,” RBC Capital Markets’ Richard Chamberlain said in a note.

Inditex Chairman and Chief Executive Officer Pablo Isla, when asked about the most recent trading trends on a conference call with analysts, declined to elaborate but said the business in its key Spanish home market remained “very healthy”.

FILE PHOTO: People are seen outside of an Inditex owned Zara store in Milan, Italy, March 30, 2017. REUTERS/Alessandro Garofalo/File Photo

In Inditex’s first quarter, which runs from Feb. 1 to April 30, it opened new stores in 30 markets and continued with an online push in southeast Asia, launching Zara online in Singapore, Malaysia, Thailand and Vietnam. It will launch its online business in India later this year.

Zara makes up two thirds of group sales.

Inditex’s net sales rose by 14 percent in the first quarter from a year earlier to 5.6 billion euros, also just above analysts’ forecasts.

Editing by Julien Toyer and Susan Fenton

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