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MarketScreener Homepage  >  Equities  >  NASDAQ OMX STOCKHOLM  >  Hennes & Mauritz    HM B   SE0000106270

HENNES & MAURITZ

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Hennes & Mauritz : Zara owner Inditex disappoints on profit margin despite strong sales

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09/11/2019 | 04:31am EDT
Shoppers walk past a Zara Store on Oxford Street in London

MADRID (Reuters) - The world's biggest fashion retailer, Inditex , on Wednesday reported weaker-than-expected growth in profit margins in the first half of the year, knocking its shares lower.

The disappointing margin growth overshadowed strong growth in sales in the first half, buoyed by good summer weather in Europe. Shares of the company, which had risen 28% year-to-date, were trading 1.6% lower at 0747 GMT.

First-half gross margin, a measure of profitability, was up 12 basis points, prompting some analysts to estimate margins actually fell in the second quarter. Inditex, owner of Zara, does not break out second quarter profit margins.

Inditex said the first-half gross margin was stable, in line with the company's forecasts.

"The season has been positive in terms of the gross margin evolution with this 12-basis-point gross margin increase ... in line with our guidance," Chairman Pablo Isla told a conference call.

The dampened margin growth could be due to foreign currency effects and a "less strong trend in full price sales", said RBC Capital Markets analyst Richard Chamberlain, who estimated a 22 basis point fall in gross margin in the second quarter.

A stronger euro can drag on profits as the group generates more than half of its sales in other currencies and then books those sales in euros when reporting results.

Inditex has been one of the few bright spots in a struggling clothing market, with sales growth outpacing those of rivals such as Sweden's H&M as it adapts to consumers' changing shopping habits by combining large stores with online sales.

Sales - in stores and online - increased 8% in the first five weeks of the latest financial period. Inditex, which also owns brands Massimo Dutti and Bershka, reiterated its full-year sales growth forecast of 4% to 6%.

The Spanish retailer reported net profit of 1.55 billion euros (1.39 billion pounds) for the six months from Feb. 1 to July 31, on sales up 7% at 12.82 billion euros, broadly in line with analysts' expectations.

(Reporting by Sonya Dowsett; Editing by Deepa Babington)

By Sonya Dowsett

Stocks mentioned in the article
ChangeLast1st jan.
HENNES & MAURITZ 1.18% 187.3 Delayed Quote.46.72%
INDITEX - INDUSTRIA DE DISEÑO TEXTIL -1.30% 26.56 End-of-day quote.18.84%
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Financials (SEK)
Sales 2019 232 B
EBIT 2019 16 373 M
Net income 2019 12 822 M
Debt 2019 10 706 M
Yield 2019 5,10%
P/E ratio 2019 23,9x
P/E ratio 2020 22,2x
EV / Sales2019 1,37x
EV / Sales2020 1,32x
Capitalization 306 B
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Technical analysis trends HENNES & MAURITZ
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Mean consensus UNDERPERFORM
Number of Analysts 24
Average target price 154,42  SEK
Last Close Price 184,90  SEK
Spread / Highest target 19,0%
Spread / Average Target -16,5%
Spread / Lowest Target -59,4%
EPS Revisions
Managers
NameTitle
Karl-Johan Persson Chief Executive Officer
Stefan Persson Chairman
Jyrki Tervonen Chief Financial Officer
Morten Halvorsen Head-Information Technology
Anders Gunnar Dahlvig Independent Director
Sector and Competitors
1st jan.Capitalization (M$)
HENNES & MAURITZ46.72%31 615
INDITEX - INDUSTRIA DE DISEÑO TEXTIL18.84%92 790
KERING12.55%64 876
FAST RETAILING CO LTD19.43%61 005
ROSS STORES29.31%39 476
ZALANDO102.63%12 528