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UPDATE 2-Zara owner Inditex pleases with H1 results, outlook

Published 09/16/2009, 03:20 AM
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* H1 profits beat forecasts, costs "strictly" controlled

* Like-for-like sales down 2 percent

* Total Aug 1-Sept 14sales up 9 percent

* Zara to launch e-business during Autumn-Winter 2010

* Shares up 3 percent

(Adds further details, analyst's comment)

By Judy MacInnes

MADRID, Sept 16 (Reuters) - Inditex, Europe's largest clothing retailer as owner of fashion chain Zara, pleased the market on Wednesday with forecast-beating half-year profits and an upbeat outlook on sales.

By 0702 GMT Inditex shares were up 3 percent after it reported earnings before interest, tax, depreciation and amortisation (EBITDA) in the six months to July 31 of 799 million euros ($1.17 billion), beating the average market forecast of 780 million.

The net profit of 375 million euros also beat the average forecast, of 355 million euros, while sales were in line with forecasts at 4.861 billion euros. In Inditex's home market of Spain, which accounts for about a third of the company's sales, retail sales suffered a 4.9 percent drop in July amidst fast-rising unemployment.

"Tight cost control is key to these better than forecast figures," Credit Suisse analyst Tony Shiret said.

"The second quarter is the first in two years where costs have grown slower than sales. We need details on why this has happened, but this is a major turnaround," he said.

Inditex said operating costs "were strictly controlled" in the first half, rising 8 percent from a year ago mainly due to new store openings.

"The figures look very strong, especially at the EBITDA level, which beat our forecast and the consensus and shows the growth in margins," Societe Generale analyst Anne Critchlow said.

The Spanish retailer's business has held up better than some other clothing retailers across the world amid the downturn thanks to its focus on selling catwalk styles at knock-down prices.

Inditex's like-for-like sales, which excludes the boost to turnover of the retailer's aggressive expansion programme around the world, fell 2 percent in the first half.

The company did not provide further details on like-for-like sales.

"We estimate like-for-like sales fell 3 percent in the first quarter so that means a drop of 1 percent in the second, and we reckon they are running at flat to down 1 percent currently. This trend is encouraging," Critchlow said.

The company said sales grew 9 percent in the period Aug 1 to September 14.

ZARA GOES ON-LINE

While flagging that Inditex has arrived late to the internet game, analysts applauded the news that Zara will go on-line during the Autumn-Winter 2010 season.

The company dipped its toes into the e-business recently with its Zara home products.

"Zara going online will be taken as a strong positive by the market. It had been falling behind in e-commerce," Critchlow said. ($1=.6810 euros) (Editing by Greg Mahlich)

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