UPDATE 1-Currency effects, later launch squeeze margins at Zara owner Inditex

From Reuters - March 14, 2018

LA CORUNA, Spain (Reuters) - Cash-rich Inditex (ITX.MC), owner of fashion chain Zara, reported a squeeze on its margins in the three months to the end of January because of currency effects and a later launch of spring and summer collections.

The retailer, whose brands include upmarket label Massimo Dutti and homewares chain Zara Home, reported annual net profit of 3.37 billion euros ($4.2 billion), in line with analysts expectations.

Inditexs gross margin was down around 140 basis points in its fourth quarter, steeper than an expected 120 basis point drop, said Richard Chamberlain of RBC Capital Markets.

We think this is mainly due to currency mix, a delay in the start of the Spring collection to the first quarter and lower full price sales than expected in the second half of the fourth quarter, he said.

Inditex is vulnerable to foreign exchange rates as it reports in euros yet makes around half its sales in other currencies.

Its shares fell to a three-year low last month after analysts cut their price targets due to the effects of a strong euro, which has strengthened against most global currencies since the beginning of the year.

The stock was leading losses on Spains blue-chip stock index early on Wednesday, down around 4 percent by 0830 GMT.


The retailer said online sales grew 41 percent over the year to reach 10 percent of net sales across the group in 2017.


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