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

HENNES & MAURITZ AB

(HM B)
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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 AB -1.68% 157.85 Delayed Quote.-15.71%
INDUSTRIA DE DISEÑO TEXTIL, S.A. -2.40% 24.85 Delayed Quote.-20.99%
JUST GROUP PLC -7.59% 45.52 Delayed Quote.-42.38%
WILL GROUP, INC. 2.75% 935 End-of-day quote.-25.32%
WORLD CO., LTD. -0.48% 1453 End-of-day quote.-46.01%
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Financials
Sales 2020 190 B 21 754 M 21 754 M
Net income 2020 1 288 M 147 M 147 M
Net Debt 2020 71 180 M 8 131 M 8 131 M
P/E ratio 2020 193x
Yield 2020 1,67%
Capitalization 261 B 29 828 M 29 844 M
EV / Sales 2020 1,75x
EV / Sales 2021 1,46x
Nbr of Employees 179 000
Free-Float 43,6%
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Mean consensus HOLD
Number of Analysts 26
Average target price 157,51 SEK
Last Close Price 157,85 SEK
Spread / Highest target 23,5%
Spread / Average Target -0,21%
Spread / Lowest Target -43,0%
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Managers
NameTitle
Helena Helmersson Chief Executive & Operating Officer
Karl-Johan Erling Persson Chairman
Adam Karlsson Chief Financial Officer
Joel Ankarberg Chief Technology Officer
Anders Gunnar Dahlvig Independent Director
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