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Strong euro lowers Inditex margins this quarter

A strong euro has taken a toll of Spanish retailer Inditex this quarter leading to lower profit margins. Gross margin dropped to 53.5 per cent in the quarter to the end of January from 59.4 per cent in the previous quarter and 54.8 per cent a year earlier.

Sales at constant exchange rates rose 10 per cent in 2017. Spain-based Inditex, the owner of Zara, is the world’s biggest fashion retailer by market value. Inditex is more affected by the strengthening euro than many European rivals because it sources a higher proportion of garments closer to home rather than from, say, Asian markets.

The Spanish company has invested in technology to merge online and store experiences. Radio-frequency identification tags on clothing keep a tight control on inventory, allowing mobile phone apps to notify customers if certain items are available at nearby stores.

The Zara app constantly refreshes its magazine-like appearance with new designs photographed on models at the company’s headquarters at a rate of 120 campaigns per season. Sales grew nine per cent in the first five weeks of the new financial year as new spring collections hit shop floors with items like printed maxi dresses, linen separates and pastel blazers at Zara.

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