Zara owner's sales have accelerated. What's helping him outpace the competition?

Sales growth at the world's largest clothing retailer Inditex, owner of brands such as Zara and Massimo Dutti, accelerated in May. That boosted investor confidence in its resilience amid a slump in consumer spending that threatens rivals, Bloomberg writes.

Inditex's revenue, excluding exchange rate fluctuations, increased by 11.5% in May, the company reported on June 3. At the same time, analysts expected only 8%, reports Reuters. This result indicates an acceleration of dynamics: the retailer simultaneously presented the financial results of the quarter ended April 30, and for this period revenue growth was 8.8%. If currency fluctuations are taken into account, sales rose 5.8% last quarter to €8.7 billion, the report said. That matched analysts' forecasts, Bloomberg points out.

Accelerating sales in constant currency bodes well for Inditex amid a weakening of negative currency factors, the agency said. Last year, currency fluctuations reduced revenue by nearly 4%, but analysts expect the negative impact to decline to 0.85% in 2026.

The company continues to demonstrate an industry-leading gross margin, which reached 61.2% in the reporting period, exceeding market expectations. Last year it was 60.6%.

Inditex managed to achieve all this despite the rising cost of raw materials. According to Bloomberg Intelligence estimates, since the war in Iran began, polyester and cotton prices have jumped 23% and 26%, respectively. The conflict has also hit consumer confidence: indicators deteriorated sharply in March, followed by a partial recovery in May, while competitors, such as H&M, faced a decline in demand, the agency writes.

Inditex shares rose by 5.7% on the trades in Madrid on June 3. Since the beginning of the year they are in the minus by 1.2%, but it is better than the dynamics of the European index of companies in the consumer sector. In March, the securities of the Spanish retailer experienced a large-scale sell-off amid uncertainty around the Iranian crisis.

Fresh data shows that Inditex still has potential for further growth, according to Bloomberg. A focus on a more premium assortment, large flagship stores and new technologies will allow the company to further offset weakening consumer spending and fierce price competition in the budget segment of the apparel market.

Profile publication Women's Wear Daily points to other drivers: Inditex is implementing a program of closures and streamlining existing stores, and is keeping shoppers interested through a series of high-profile projects, including a recent collaboration with Puerto Rican singer Bad Bunny and an upcoming project with British fashion designer John Galliano. The company also benefits from a flexible supply chain, WWD notes. It allows it to respond to changes in demand faster than many competitors. Most of Inditex's production is located relatively close to its main markets, so the retailer can promptly order the most popular products and adjust collections right in the course of the season, the publication says.

The report confirms that the industry giant is capable of continuing to build market share, Jefferies analyst James Grzinich predicted. According to him, investors were looking for confirmation that "the company is well prepared to operate in a deteriorating global environment". The analyst reiterated a buy recommendation on Inditex shares and a target price of €62. This implies a potential upside of 17.6%.

Goldman Sachs also maintained its recommendation to buy these securities. Its target of €60 is 13.9% higher than the quotations at the last closing on June 2.

This article was AI-translated and verified by a human editor