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Fashion Chain Zara Posts Attractive Profits

(c) Sky News 2011

Fashion chain Zara UK has seen a huge surge in profits thanks to strong online sales and applying the brakes to new store openings.

High street (BSE: HIGHSTREE.BO - news) retailer Zara UK recorded a pre-tax profit of £15.8m in the year to January, up from £618,000 the previous year  - a jump of 2,456% - according to accounts filed at Companies House.

The chain, owned by Spanish retail giant Inditex, reported a 7% increase in sales, up from £310.6m to £332.4m.

The big jump in profits is a result of a sharp reduction of opening new stores; the chain opened no new shops last year and has no commitments to do so for the rest of 2011.

The impressive figures were also helped by a break into online trade.

Zara, which has 65 stores in the UK, started to sell its products online on in six countries including the UK last September.

The strong results come at a challenging time on the UK high street, which is being hit by a consumer spending squeeze.

High (Berlin: HIH.BE - news) inflation combined with a muted wage growth is putting pressure on households which are seeing their incomes squeezed.

High street retailer Jane Norman went into administration in June and was forced to sell 90 stores.

Other retailers which have been reporting tough trade are HMV, Mothercare and Currys Digital owner Dixons Retail.

Inditex has 4,780 stores in 77 countries, with 91 outlets in the UK under the brands Zara, Massimo Dutti, Pull and Bear, Bershka and Zara Home.