By Sarah Morris and Elisabeth O'Leary
MADRID/LA CORUNA (Reuters) - Spanish fashion giant Inditex (MC:ITX) posted a 5 percent rise in 2014 profit on Wednesday, as an economic recovery fed customer appetite for fashion in its biggest European markets and set it on course for further expansion via bigger stores.
The world's biggest fashion retailer, based just outside La Coruna at Spain's northwestern tip, said profit rose to 2.5 billion euros (2 billion pounds) and like-for-like sales rose 5 percent, while overall sales rose 8 percent to 18.12 billion euros, meeting market expectations.
The Zara-owner, which has lured shoppers this winter with skirts and tunics in leather, said sales in the six weeks to March 14 rose 13 percent in constant currencies.
"This is a beat versus existing consensus forecasts at around 4 percent, suggesting good support to date for full year estimates," said Societe Generale (PARIS:SOGN) analyst Anne Critchlow, who estimated a 6 percent rise in like-for-like sales in the six weeks to March 14 and expected the shares to be supported.
That compares with a better-than-expected 15 percent sales rise at Hennes & Mauritz (ST:HMb) in February.
Inditex shares are trading at around 30 times this year's expected earnings, versus around 25 times for H&M.
Inditex's biggest challenge at present is to keep up with online-only shopping upstarts like Germany's Zalando (DE:ZALG) or Britain's Asos (L:ASOS)..
With that in mind it is discretely closing smaller branches and concentrating on big flagship stores, such as the 4,400 square metre SoHo site in New York's Manhattan acquired earlier this year.
The company confirmed that strategy, saying it would open up to 480 new shops and close 80 to 100 smaller shops in locations nearby.
The cash-rich retailer also said it would invest around 1.35 billion euros versus 1.24 billion euros in 2014.
Brokers such as Bernstein and Kepler cut their recommendations on Inditex earlier this month after a rally that added more than 18 percent to its stock market value in the two months to end-February.
That anticipated improvement in its business outlook for the next year as European economic growth slowly picks up and the group expands to new markets.
($1 = 0.9447 euros)