Inditex shares up on upbeat outlook

MADRID, March 25 (Reuters) - Spain's Inditex, owner of price-conscious fashion chain Zara, reported flat net profit for 2008, in line with expectations, but pleased investors with an upbeat outlook for 2009, pushing its shares higher.

Inditex, Europe's biggest clothing retailer, said it aimed for positive same-store sales in 2009 for its global portfolio of over 4,000 stores in 73 countries, despite a grim sales environment as shoppers cut back in the global downturn.

"Our target at this stage of the year is to have positive like-for-like sales growth," Pablo Isla, chief executive, said in a conference call. "At the same time, we are aware that the environment is challenging," he added.

Inditex, which also owns preppie label Massimo Dutti, reported full-year net profit of €1.25bn ($1.7bn), almost flat on last year and close to the €1.23bn forecast in a Reuters poll of nine analysts.

Shares rallied on the upbeat forecast to trade 6 per cent higher at €28.35 at 1030 GMT, making it Europe's top-performing blue-chip stock. The stock had fallen 15 per cent in March on concerns about exposure to recession-bound Spain, which accounts for a third of its business.

"The stock has been trading at a discount to its main peer H&M over recent days. The results this morning have shown that it remains a quality stock to buy into," said one Madrid-based trader.

DIVIDEND STEADY

Both Inditex and arch-rival H&M of Sweden are weathering a severe economic downturn better than many other clothing retailers, thanks to their offering of high-fashion looks taken straight from the catwalks at low prices.

Debt-free Inditex said local currency sales in February were up 9 per cent. Anne Critchlow, analyst at Societe Generale, said this was reassuring, translating into same-store sales down between 1 and 3 per cent in a difficult month for retailers.

Sales rose 10 per cent to €10.41bn in the year to end-January, thanks to the aggressive expansion abroad of the cash-generative company.

However, a negative note was a lower rate of store expansion than expected, said Societe Generale's Critchlow. She said she had expected openings of around 570 stores in 2009, against a company forecast range of 370 to 450 stores.

Inditex said it would pay a dividend of €1.05 per share.

"Inditex's dividend payout ratio has remained at 52 per cent despite its strong net funds position, reflecting Inditex's desire to preserve cash in the current tough environment," said JP Morgan analyst Richard Chamberlain.

Zara's spring collection in a central Madrid store ranged from one-shouldered hot pink silk cocktail dresses for €59.90 to cotton vest tops in a choice of colours for €3.90.

"I think the relation between price and quality is good now and during a recession," said one shopper, clothesmaker Fatima Hernandez, examining a white sleeveless dress.

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