11 December 2024
If you are covering Inditex's Q3 results, please see the following comment from Mamta Valechha, consumer discretionary analyst at Quilter Cheviot:
“Inditex, the largest fashion retailer in the world and the owner of Zara, one of the largest global brands, reported softer than expected Q3 results this morning.
“The retailer’s Q3 sales were up 11% at constant currency, compared to the 12% that had been anticipated. This slight miss on sales, combined with a lower gross margin, which was down 20 basis points compared to the 10 basis points increase that had been expected, drove a 6% miss on Inditex’s earnings before interest and taxes (EBIT).
“Inditex’s current trading, which reflects the beginning of the festive period from the start of November to 9 December, shows sales are up 9%. Although this is relatively positive given difficult weather and a tough consumer backdrop, this is at the lower end of expectations which were around 9-10%.
“Management has offered no change to guidance, instead reiterating that gross margins are still expected to remain stable.
“While today’s results are a slight miss, when put into the broader context of the consumer discretionary sector, Inditex’s numbers still look relatively solid. However, given the high expectations going into this print, especially after the strong run the stock has had this year which has seen it increase 38%, there is no surprise that there is some profit taking this morning.
“Some may consider this print to be an indication that the Black Friday sales period was softer than what headlines suggested, but Inditex has a tough 14% comparator for the first few weeks of the quarter which later eases. Inditex also made no reference to any impact from the Spanish floods, but this is likely to have been a headwind.
“Ultimately, today’s results do not change the story. Inditex remains one of the best in class retailers with a strong business model which we expect to continue performing well.”
