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Inditex FY18 Profit Up, Lifts Dividend; Sees Higher FY19 LFL Sales; Stock Dips

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Spanish fashion retailer Industria de Diseño Textil SA (IDEXF.PK) or Inditex reported Wednesday higher profit in its fiscal 2018 with increased net sales and like-for-like sales. The company also lifted its dividend. Meanwhile, Bloomberg reported that the Spanish owner of the Zara apparel chain reported the weakest earnings growth in five years. Inditex shares fell around 4 percent in the morning trading.

Regarding the current trading, the company said store sales in local currencies increased by 7 percent from February 1 to March 9. The management estimates like-for-like sales growth of 4 percent - 6 percent in fiscal 2019.

For fiscal 2018, net profit rose 2 percent to 3.44 billion euros from last year's 3.37 billion euros.

EBITDA and EBIT reached all-time highs, supported by strong margins. EBIT went up 1 percent to 4.36 billion euros, and EBITDA grew 3 percent to 5.46 billion euros.

Gross profit increased 4 percent to 14.8 billion euros supporting a 39 basis point increase in gross margin to 56.7 percent.

Inditex net sales increased 3 percent to 26.15 billion euros from last year's 25.34 billion euros. Sales grew 7 percent in local currencies, underpinned by growth in all of the Group's geographic regions.

Like-for-like sales growth remains robust, up 4 percent in the year, and positive across all regions and brands, as well as in both the online and store platforms.

Revenue from online sales climbed 27 percent year-on-year to 3.2 billion euros. Revenue from online sales accounted for 14 percent of sales in markets with both a store and online presence.

Zara increased its presence to 202 markets, while Massimo Dutti and Uterqüe expended their online platforms to 106 new markets, boosting their reach to 184 and 148 markets, respectively, the company noted.

Further, the company said its Board of Directors will propose a new dividend policy at the next AGM, to be held in July. The ordinary dividend will increase to represent a payout ratio of 60 percent - up from 50 percent at present - and Inditex will also distribute a bonus dividend totalling €1 per share, split across 2019, 2020 and 2021.

The change in policy translates to a 17 percent increase in the dividend for the year to 0.88 euro per share, in which 0.66 euro as an ordinary dividend and 0.22 euro as a bonus dividend.

In Spain, Inditex shares were trading at 25.26 euros, down 3.84 percent.

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