Zara Group Announces Slowed Sales

The Inditex group, which owns Spanish retailer Zara has today announced that its sales figures had fallen by more than it had anticipated, despite an overall growth in profitability which it puts down to increased efficiency in cost centres against struggling external market conditions.

Spanish-based Inditex, the second largest clothing retailer in the world, announced today that it had seen sales overall decline, amidst growing consumer concern over the availability of short term finance which has lead to falling sales throughout consumer retail sectors such as clothing, even in the run up to the Christmas period.

Zara’s parent company Massimo Dutti and Pull and Bear has seen a drop in share prices over today by 4% as a result of the reports, despite the fact that profits overall did in fact increase. However the fall in revenues was particularly disturbing for investors as an indication of potential future problems.

Amongst particular concern is the future of its home department, which it is thought could take a further hit as a result of the current downbeat US housing market, which could eventually have the impact of affecting up to 38% of revenues.

Whilst revenues for the company were down, it did still manage to post an increase of 30% in its profits, up to around 825 million euros, roughly $1.2 billion, as a direct result of stringent cost cutting measures across the company over the last year, which has seen an increase in profits beyond initial market forecasts.

Inditex is currently pursuing an extremely aggressive expansion plan throughout emerging economies in the East, whilst it also looks to consolidate its operations within the more traditional markets. Whilst cost cutting was achieved overall, it is though that performance may improve further as it becomes more and more established within its new territories, like China and Russia.

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