WRAPUP 1-Cost, demand pressures face fashion retailers

* Inditex 9-month net profit up 42 pct to 1.18 bln euros

* Analysts see recent like-for-like sales down

* SuperGroup H1 profit up 69 pct, sees possible margin hit

* H&M same-store sales up 8 pct in Nov

* Inditex, SuperGroup, H&M shares fall

By Sonya Dowsett and James Davey

MADRID/LONDON, Dec 15 (BestGrowthStock) – The rising cost of cotton
and labour and sluggish European demand are set to squeeze
fashion retailers, results from world number one Inditex
(ITX.MC: ) and others in the industry showed on Wednesday.

The Spanish group, owner of the ubiquitous Zara brand,
signalled a slowdown in underlying sales as it met forecasts
with a 42 percent jump in nine-month net profit.

Earnings were driven higher by rapid expansion in
fast-growing Asian markets and a focus on affordable fashions.

But sales in local currencies were up 10 percent from Aug. 1
to Dec. 12, which some analysts said amounted to a slowdown in
recent weeks after stripping out new store openings.
“We’ve calculated minus 2 percent like-for-like (sales for
the first six weeks of the fourth-quarter),” said SG analyst
Anne Critchlow. “This does not bode well.”

At 0850 GMT Inditex shares, which have surged around 45
percent this year, were down 2.8 percent at 60.73 euros, one of
the biggest declines among European blue-chip companies.

Shares in Sweden’s Hennes & Mauritz (HMb.ST: ), Europe’s No.2
clothing retailer, were also dragged lower despite reporting a
rise in same-store sales for November that came in just ahead of
analysts’ expectations. [ID:nLDE6BE07L]

Britain’s SuperGroup (SGP.L: ), home of the Superdry brand
worn by celebrities such as David Beckham and Zac Efron, also
dropped despite a big rise in first-half profits, as it warned
rising input costs could hit margins next year. [ID:nLDE6BD15U]

Euro zone retail sales http://r.reuters.com/nud32r



International retailers are increasingly relying on
fast-growing emerging markets to drive growth amid an uneven
economic recovery in Europe and the United States.

Best Buy (BBY.N: ), the world’s No.1 electricals retailer,
missed quarterly earnings forecasts on Tuesday, while the
pressure on Inditex’s home market was underscored on Wednesday
when credit rating agency Moody’s said it had put Spain on
review for possible downgrade. [ID:nN13207737] [ID:nL3E6NF0D8]

Inditex, which launched online sales of items such as black
net skirted cocktail dresses for under 50 euros at Zara in
September, said it made a net profit of 1.18 billion euros ($1.6
billion) from Feb. 1-Oct. 31, in line with a Reuters poll.

The group, with 4,907 stores in 77 countries, said it was
benefiting in particular from its rapid expansion in Asia, where
it has opened over 40 stores in China this financial year.

Inditex, which also owns youth label Bershka and preppie
brand Massimo Dutti, has been steadily reducing its exposure to
Spain, which accounted for 28 percent of sales in the first
half, down from 32 percent in the first half of 2009.

Despite the signs of slower sales growth, some analysts were
encouraged by Inditex’s financial strength.

“You’ve got a very strong cash position of over 3 billion
(euros) for the third quarter which will probably lead people to
suspect that another special dividend is on the way,” said
Nomura analyst Fraser Ramzan.


Retailers across the world are battling a rise in input
costs as wage rates increase in China, where many of them source
their goods. Clothing retailers are experiencing extra pressure
from soaring cotton prices. [ID:nLDE6AB0QZ]

H&M rattled investors in September when it reported a fall
in third-quarter profit (Read more your timing to make a profit.) margins, while British discount chain
Primark reiterated last week that rising input costs would
affect its profitability. [ID:nLDE68R0V0] [ID:nLDE6B70U4]

Inditex has fared better, helped by the fact that it makes
most of its garments in European markets and North Africa, where
labour costs have been rising at much more moderate levels.

Its gross margin has risen to 59.9 percent from 57.1 percent
in the comparable period last year.

SuperGroup, however, said rising costs could affect its
profit margins next year, hitting shares which have more than
trebled since listing in March.

At 0840 GMT, SuperGroup shares were down 17 percent at 1,350
pence, even though the group reporting a 69 percent rise in
first-half underlying profit to 13.5 million pounds ($21.4
million), just above analysts’ average forecast.

H&M, which runs over 2,200 stores in 38 countries, said
same-store sales rose 8 percent in November, just above
analysts’ average forecast of 7.4 percent in a Reuters poll.
(Additional reporting by Mark Potter in London and Simon
Johnson in Stockholm; Editing by Andrew Callus)

WRAPUP 1-Cost, demand pressures face fashion retailers