ZARA Parent Company Strong Growth In The First Quarter, Shares Rose 5.5%

Spain Fast fashion ZARA The business model is obviously a business model that can withstand warm winter or climate factors, which is becoming more and more frightening for ZARA's fashion retailers.

The first quarter results of Zara's parent group Inditex once again showed strong growth. With its robust expansion strategy and powerful e-commerce network to beat its competitors H&M and UNIQLO, it maintained its dominance in fast fashion retailers. After the announcement of the earnings report, Inditex group's share price rose 5.5% to 29.52 euros per share.

Inditex group's first quarter turnover amounted to 4 billion 880 million euros ($5 billion 460 million), up 12% over the same period last year, which exceeded FactSet analysts' earlier forecast of 4 billion 840 million euros.

At a constant exchange rate, revenues rose 17% from February 1st to April 30th, and net profit increased by 6% to 554 million euros ($620 million).

This strong momentum has extended to the second quarter of the fiscal year, with a turnover of 15% during the period from May 1st to June 13th.

Inditex group's strong performance is putting H&M group and Uniqlo H&M has reported a growth in sales in May, including the value added tax, which accounted for 9% of its revenue in local currency, while the growth rate in April was 5%. The profit growth in the second quarter of this year deteriorated and second times the full year earnings forecast. The company said it was mainly affected by the global warming and the negative impact of consumer demand for winter clothing, while the company's profits fell 30.2% in the first three quarters of the fiscal year.

Bernstein analyst Jamie Merriman and Jennifer Wong pointed out in a research report: "when most fashion retailers complain about the negative effects of weather on the sales environment, the performance of Inditex group proves the strong power of the business model and its ability to create outstanding performance."

Inditex chairman and CEO Pablo Isla said in a conference call: "apart from the strong growth of the exchange rate, the gross profit margin will also increase. The year-on-year turnover in the first quarter is increasing in all market areas. We will continue to tap the important market opportunities of Inditex group in global growth. "

The executive attributed the group's strong performance to its fast response business model, because most of its production is based in Spain, so retailers can quickly produce and transport clothing to key markets. He pointed out: "this is the global operation of business models. Supply chain responsiveness, constantly emerging design capabilities and other strategic initiatives are the core strengths of the group in the past few years."

In addition to ZARA, Inditex group owns brands such as Bershka, Pull & Bear and Massimo Dutti. At the beginning of this year, Inditex group announced that it would slow down the expansion of the entity store network and concentrate on retail multi-channel development, and the brand retail store guidance data in 2016 decreased from 8% to 10% to 6% to 8%. Pablo Isla said on Wednesday: "with the full cooperation of online and offline stores, this integrated business model is becoming stronger and stronger, and is playing a greater synergy effect."

In the first quarter, Inditex group expanded its e-commerce platform in the EU, and launched online shopping centers in Bulgaria, Finland, Hungary and other countries. At present, the group has online sales channels in 39 markets around the world, and plans to complete the publication of all its concept brand online stores in Europe and Turkey this year.

As of the first quarter, Inditex Group There are 72 new stores in 31 markets. As of April 30th, the total number of stores in the world reached 7085, and plans to enter Vietnam and New Zealand market in the second half of this year.

Inditex Group recorded a profit of nearly 20 billion yuan in 2015. ZARA is undoubtedly the king of fast fashion industry. With the weakness of luxury goods industry, high-end physical store business is also running away. Now ZARA has a stronger bargaining power, which requires shopping malls to give better sales space and continue to expand rapidly in China. ZARA entered China in 2006 and has opened more than 500 stores in China.

In the current fashion retail market, the trend is changing rapidly, and the impact of climate fluctuation is even greater. This also makes ZARA the main core of the competitive advantage. Some analysts have pointed out that ZARA, which is able to adapt to climate change and make rapid adjustments, is making panic such as GAP, H&M and UNIQLO fast fashion brands panic. Not only that, ZARA has also greatly shocked the traditional fashion retailing industry, including underwear brand Vitoria's secret and luxury brand Ralph Lauren Ralph lauren has expressed the need to follow the fashion of fast fashion.

Bernstein, an analyst at the Wall Street journal, has said that the Inditex group has the best business model of the clothing industry and expects that it will continue to maintain two digit growth over the next five years.