* Net profit up 9 pct at 2.2 bln euros in Feb-Oct period
* Sales up 14.5 pct in local currencies over period
* Slower-moving rivals expected to be hit by warmer autumn
* Shares down 1.9 pct by 1010 GMT on gross margin miss
(Adds details from conference call, analyst's comment, share
By Angus Berwick
MADRID, Dec 14 Inditex, the world's
biggest clothing retailer and owner of Zara, used its "fast
fashion" model to adapt to warmer than usual autumn weather,
speeding up its sales growth in recent weeks and staying ahead
of slower-moving rivals.
Unlike the Spanish firm, Abercrombie & Fitch and Gap
posted dismal fourth-quarter sales last month.
Inditex reacts to changing fashion trends and weather by
keeping its manufacturing bases close to its distribution centre
in Galicia, northern Spain. Items are designed, made and shipped
to stores often in less than a month, boosting profitability.
Net profit for the nine months to the end of October was up
9 percent from the year before at 2.2 billion euros ($2.3
billion), in line with analysts' forecasts, as garments such as
velvet dresses, military blazers and mini skirts helped push
Inditex sales up by 14.5 percent in local currency terms.
With more than 7,200 stores in 93 markets, Inditex has
shifted from multiple new store openings to setting up large
flagship stores in key locations and tying in its online
Apart from Zara, which makes up two thirds of sales, its
brands include younger fashion chain Pull&Bear and upmarket
label Massimo Dutti.
Other retailers have been trying to speed up their supply
chain to match Inditex but are held back by their sourcing from
Asia, stretching lead times. They have also started investing in
new higher-margin brands.
But Inditex has matched them and has scope to expand
further. Analysts at Macquarie say it has only a 2 percent share
of a "highly fragmented" global market and they expect it to
grow quickly in emerging markets and the United States.
Between November and mid-December, Inditex's sales growth
accelerated to 16 percent from a year before, implying growth of
10.5 percent once the effect of new store openings is stripped
out, Bernstein analysts said.
"The reason for our strong like-for-like sales growth ...
has to do with the global execution of our business model, the
fully integrated approach between stores and online," Chairman
Pablo Isla told analysts.
The like-for-like sales growth compares with its next
biggest rival H&M's reported 10 percent year-on-year
increase in local-currency sales in October. H&M is due to
publish November sales on Thursday.
Analysts expect H&M and others to have been hit by the
warmer autumn weather as they failed to swap out collections of
cold-weather items to attract shoppers.
Inditex shares were down 1.9 percent by 1010GMT, against a
0.5 percent fall on the European STOXX 600 index. They
have risen 2.5 percent over the past year, against a near 9
percent fall in H&M's shares.
Analysts contributed Inditex's share price dip to a slight
miss of forecasts for their gross margin - the profit obtained
after selling a product - and said they needed to improve
earnings before interest and taxes (EBIT) to rise higher.
"Currency translation was very negative in the first half
but in the second half it will have much less of an impact.
That's why EBIT growth should continue to recover which should
help the shares make progress," SocGen analyst Anne Critchlow
Critchlow said third-quarter EBIT was up 11 percent
year-on-year to 1.2 billion euros, 0.4 percent below consensus.
EBIT was in the single digits for the previous three quarters.
($1 = 0.9395 euros)
(Additional reporting by Robert Hetz; Editing by Greg Mahlich
and Alexander Smith)