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* Gross margin squeezed in fourth quarter
* Bad weather drags on sales in new financial year
* Full-year results in line with expectations
* Raises dividend by 10.3 percent
* Shares reverse losses, trade at top of IBEX(Adds weather effects, analyst comment, details on retailmodel, updates shares)
By Sonya Dowsett
LA CORUNA,
But Chief Executive Pablo Isla said the strong euro shouldnot depress margins this year, despite the fact that the dollaris weakening again on fears of a global trade war.
"Looking to the year ahead, we should not see a negativeimpact on margin at current exchange rates," Isla told a newsconference in the company's headquarters in northern
Inditex, the world's biggest fashion retailer by marketvalue, is more affected by the strengthening euro than Europeanrivals because of its high proportion of production close toheadquarters, which allows it to respond faster to new trendsand demand.
Analyst Anne Critchlow of Societe Generale said Inditexaimed to offset the currency headwinds by the timing of some ofits spending.
"As we don't know the precise volumes and timing ofpurchases, we will have to take the company's view of the grossmargin for the current year," she said.
Inditex's proportion of online sales - increasinglyimportant as it fends off threats from the likes of Amazon- jumped 41 percent to reach 10 percent of net salesacross the group in 2017 - still well below its main rivals.
"Inditex sees strong growth opportunities and continues toexpand its global, fully integrated store and online salesplatform," said the retailer, which analysts say connects itsweb and physical offerings better than competitors do.
Inditex shares - which fell to a three-year low last monthafter analysts cut their price targets due to the effect of thestrong euro - traded 2.1 percent higher by 1230 GMT onWednesday, at the top of
MARGIN PRESSURE
Inditex, whose brands include Massimo Dutti and homewareschain Zara Home, said its gross margin dropped to 53.5 percentin the quarter to the end of January from 59.4 percent in theprevious quarter and 54.8 percent a year earlier.
"We think this is mainly due to currency mix, a delay in thestart of the spring collection to the first quarter and lowerfull price sales than expected in the second half of the fourthquarter," said Richard Chamberlain of RBC Capital Markets.
Inditex reported net profit of
The cash-rich company proposed a 10.3 percent increase inthe dividend to
Sales at constant exchange rates rose 10 percent to
On the same basis, sales grew 9 percent in the first fiveweeks of the new financial year as new spring collections hitshop floors with items like printed maxi dresses, linenseparates and pastel blazers at Zara.
Large Inditex stores in prime shopping areas act as ashowcase for clothing which can be bought there and then, orordered later online via the app or website, blurring thedistinction between the different sales methods.
However, there is still room to expand online.
The 10 percent of sales online compare with 12 percent forSwedish rival H&M and lag many British retailers such as Nextor Marks and Spencer, said Societe Generale's Critchlow.
"Clearly, the online exposure for H&M and Inditex shouldrise over time."(
