Inditex, the world's biggest clothes retailer and owner of Zara, today reported a 9% rise in first-half profit but its gross margin as a percentage of sales slipped because of a stronger euro.
Inditex's profits are sensitive to fluctuations in the currency as it makes most of its clothes in the euro zone to respond quickly to fashion trends.
But it generates more than half of its sales in countries outside the currency bloc.
The decline in its gross margin meant Inditex missed forecasts for second-quarter earnings before interest and tax (EBIT), analysts said.
Inditex said its gross margin as a percentage of sales fell to 56.4% from 56.8% in the first six months of its financial year, which runs from February 1 to July 31.
Its first-half net profit of €1.37 billion was slightly short of expectations while earnings before interest, tax, depreciation and amortisation (EBITDA) came in at €2.29 billion, up 9% from a year earlier.
Chairman and Chief Executive Pablo Isla said the sales margin was still stable, and would remain so for the full year.
Inditex's definition of a stable margin is one that rises or falls by no more than 50 basis points each year.
Inditex's model of responding to catwalk trends with small batches of clothes that are not replaced when they sell out has allowed it to consistently outperform rivals such as H&M.
The Spanish retailer's other brands include teen label Bershka and underwear chain Oysho.
Figures showed that recent sales in the company's more than 7,000 stores worldwide were performing well, as shoppers snapped up items from Zara's autumn/winter collections.
Sales after adjusting for currency fluctuations rose 12% in the first seven weeks of the second half, which analysts said was one or two percentage points better than the consensus forecast.
