12 March 2025
If you are covering the latest financial results from Inditex, parent company of Zara, please find below a comment from Mamta Valechha, consumer discretionary analyst at Quilter Cheviot:
“Inditex, the world’s biggest fashion retailer and owner of Zara, delivered a set of results of two halves today. Its final quarter of 2024 represented strong sales, up 10.5%, ahead of expectations, with an acceleration from how the period started. Furthermore, the business managed to expand its gross margin and controlled costs well to deliver a 5% beat in operating profit.
“Current trading, however, is disappointing. Sales between the beginning of February and the start of this week rose 4%, compared to expectations of 8% growth. Much of this probably reflects weak consumer sentiment in the UK, Germany and US, as well as unfavourable weather. That said, February is a relatively small and unseasonal month for Inditex and the apparel retail sector more broadly, so alarm bells are not ringing quite yet on any consistent slowdown.
“That does not mean the question will not be asked by investors, however. The debate around the company will likely be on to what extent this slowdown is a “one-off” hurt by weather or a temporary dip in consumer sentiment in what is a relatively unsubstantial month versus whether this is the start of a more sustained slowdown in growth.
“No sales guidance was given, but the release highlighted that margins are expected to remain stable, which is in line with expectations. Given Inditex’s size and scale, it will be an important company to watch to see just how consumers are faring and if there is any sustained negative sentiment creeping in given the economic conditions look volatile for a while.”
