Zara owner Inditex posts 16 per cent drop

Inditex, Europe's biggest clothing retailer and owner of the Zara brand, yesterday reported a 16 per cent drop in first-quarter net profit as consumers cut spending in the economic downturn.

In the three months to April, the company earned a net profit of €184 million compared to €219 million on the same year-ago period, the company said in a statement.

A survey of analysts polled by Dow Jones Newswires was expecting net profit of €190 million. With many of its key markets in recession, Inditex saw the growth of its sales in the first quarter slow.

Total sales rose five per cent in the period over the same time last year to €2.3 billion. Sales had risen nine per cent in the first quarter of 2008 over the same year-ago period to €2.2 billion.

The company's results were also affected by a slowdown in the rate of new store openings.

Inditex, which owns brands such as Massimo Dutti and Bershka, opened 95 new outlets during the first quarter compared to 145 in the same period last year. The company, controlled by Amancio Ortega, the richest man in Spain, posted a flat net profit of €1.25 billion in 2008.

It gets about a third of its sales in Spain, which is going through its worst recession in decades as the global credit crunch worsened a correction which was already underway in its key housing sector.

Spain's unemployment rate hit 17.4 per cent during the first quarter, more than double the average for the entire 27-nation European Union.