Inditex shares soared to their highest since February. What did the owner of Zara surprise investors with?
Sales at Spain's Inditex, which owns brands such as Zara and Massimo Dutti, accelerated in November, signaling the company's resilience amid weak consumer sentiment. The results of the retail giant, which is considered an indicator of the state of the global "fast fashion" industry, give a first indication of how the sector is feeling at the start of the pre-New Year season, Reuters notes.
Details
Inditex beat market expectations at the start of its fiscal fourth quarter, reporting sales growth of 10.6 percent in November, the month that marks Black Friday, the opening of the Christmas sales season. The world's largest publicly traded fashion retailer also recorded strong results in its third fiscal quarter, which ended in October. Quarterly sales rose 8.4% to €9.8 billion, against a consensus forecast of €9.69 billion.
The acceleration confirmed the resilience of the company's business amid weakening consumer sentiment that has hit many of its competitors, Bloomberg writes.
Inditex shares jumped 8.3% to €53.14 a share after the open of trading in Madrid, hitting an intraday high since Feb. 21.
What the analysts are saying
"Current sales at +10.6% are ahead of even the upper end of expectations," Bloomberg quoted JPMorgan Chase analyst Georgina Yohanan as saying. Coupled with growth in the third fiscal quarter, this "should provide confidence," she wrote to clients.
While consumer demand in Europe as a whole remains sluggish, Inditex looks more resilient in the face of competition from Asian online retailers Shein and Temu than its rival H&M, according to Reuters.
About 20% of Inditex's revenue comes from its home market, and Spain's strong economy is supporting it, the agency wrote, citing Bernstein analyst William Woods. "Spain has been just phenomenal; the Spanish economy is working and people are buying more clothes," he said.
What to do with stocks
Analysts' attitude towards Inditex has become more optimistic over the past three months. According to FactSet, the consensus rating has remained at an "Overweight" level, with the number of buy recommendations rising from 14 to 16, while the bear camp has thinned slightly, with the number of sell recommendations falling from four to three. MarketScreener's average target price of €51.3 implies a potential upside of 4.5% by the last close of trading.
This article was AI-translated and verified by a human editor
