By Mauro Orru 
 

Shares in Industria de Diseno Textil SA, the owner of Zara known as Inditex, rose Wednesday on the back of a better-than-expected set of numbers for the second quarter as the group retained profitability at a difficult time for the retail sector.

At 0820 GMT, Inditex shares traded 6.6% higher at EUR25.45.

The Spanish fashion giant, which also owns Oysho, Massimo Dutti and Pull&Bear, posted net profit of 214 million euros ($253.5 million) for the second quarter, down from EUR816 million for the second quarter of the previous year.

Net sales for the same period fell to EUR4.7 billion from EUR6.9 billion, but analysts agree that the company fared better than expected despite contractions in second-quarter figures.

"Current trading was always going to be investors' greater area of interest, and Inditex has not disappointed here," analysts at U.S. bank Jefferies said, pointing out that net profit came in well above their estimates of EUR62 million and consensus at EUR73 million, while sales were broadly in line.

Inditex's net cash grew EUR734 million in the quarter and the company managed to reduce second-quarter operating expenses by 21%, which analysts at U.S. bank Citi said was "impressive" compared with their estimates of a 15% reduction.

However, the company's first-half results suffered from the impact of temporary store closures due to coronavirus lockdown measures, particularly in the first quarter.

Inditex reported a net loss of EUR195 million for the six months compared with a net profit of EUR1.55 billion a year earlier.

The figure includes a EUR308 million provision for its store-optimization program which Inditex booked in the first quarter. The company previously said it would close between 13% and 16% of its total store network as part of a 2020-22 strategy.

First-half net sales plunged to EUR8.03 billion from EUR12.82 billion, although online sales grew 74%. However, Inditex said sales have been progressively recovering as 96% of its stores were open by the end of July.

Inditex didn't provide specific guidance for the year, but said it's seeing a rapid recovery in operations heading into the second half.

 

Write to Mauro Orru at mauro.orru@wsj.com; @MauroOrru94

 

(END) Dow Jones Newswires

September 16, 2020 04:46 ET (08:46 GMT)

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