March 13 - Zara owner Inditex tapped fashion-hungry consumers in new markets in 2012 to grow net profit by 22 percent even as austerity-hit shoppers in Europe tightened belts. Hayley Platt asks why the world's largest clothing retailer is doing so well and can it be sustained?
Big profits from a Spanish retailer - not something you hear very often these days - unless your talking Inditex. The owner of Zara has again posted a sharp rise in full-year profit - up 22 percent to 2.4bln euros. But it's expansion outside Europe which has done the trick says Conlumino's Neil Saunders. SOUNDBITE: Neil Saunders, Managing Director, Conlumino, saying (English): "They've been going into a lot of new markets, they're mopping up a lot of growth in those markets and that's supporting the overall figures. But the other thing that underpins it, is a constant reinvention of the fashion offer. The whole process of Inditex bringing clothing to market is extremely quick. So they're very good at interpreting trends and nuances in the market and bringing those to the customer very quickly." Sales rose 16 percent to just under 16 billion euros. Asia's share was up to 20 percent from 18 while the Americas hit 14 percent from 12. China is a big focus for the world's biggest clothing retailer. It's been expanding there since 2006, serving a growing middle class. It now has almost 350 Chinese stores. But it's looking at new markets too - including Georgia, Bosnia and Ecuador. SOUNDBITE: Neil Saunders, Managing Director, Columino, saying (English): "On the surface it does seem quite risky because obviously a lot of these markets are untested. But the fact is they getting in there early before other people, they're testing the waters and if they succeed it provides a new region of growth for them." It needs that to compensate for poor sales at home. Its recession-hit Spanish market now provides 21% of total revenue - down from 25%. The rest of Europe continues to account for 45 percent of revenue. And the group also has a growing internet presence. Russia will get Zara online in the autumn - it's already been in China a year. There are question marks about sustainability and where growth might come from longer term. But with 6,000 stores in 86 countries - most of them making a profit - Inditex is achieving results many rivals can only dream of.