Dec 14, 2017

Zara's shrinking profit margins spooks investors

Christopher Matthews

Photo of women gazing at cellphone in front of Zara store in an upscale Istanbul neighborhood — A Zara store in an upscale Istanbul neighbourhood in November 2017. Photo: Lefteris Pitarakis / AP

Inditex, the Spanish owner of Zara and largest apparel retailer in the world, announced a healthy 6% increase in net income for the first 9 months of 2017, but also a continued decline in profit margins — a measure that has been steadily falling since 2013.

Investors have bid the stock down the stock more than 2% during trading Thursday.

Why it matters: There is debate over whether the company can blame its profitability struggles on a strong Euro, but the 5% drop in Inditex stock this year shows that Wall Street's love affair with Inditex may be ending.

A best-in-class retailer: Despite the 2017 decline in Inditex's stock price, the firm has shown outstanding performance during the prior decade.

Since 2007, the firm has grown from roughly 3,100 stores to more than 7,500 today, on the strength of its decentralized supply chain and horizontally organized design team, which enables the firm to react to fashion trends faster than its peers.

Go deeper: Read the Wall Street Journal's piece.

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Zara's shrinking profit margins spooks investors

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