Inditex Sales Accelerate Heading into Holiday Season, But Euro Strength Weighs on Forecasts
Madrid – Inditex, the world’s largest fashion retailer, is entering the crucial Christmas shopping period with accelerating sales, though analysts caution that a strengthening euro will likely limit reported growth. Shares have risen over 7% this month, recovering from a downturn initiated in June following the release of weaker-than-expected first-quarter results – the company’s weakest in nearly five years.
Despite the positive momentum, reports indicate a slowdown in sales as the third quarter progressed. Barclays projects a 7.2% sales increase in local currency, acknowledging this reflects “weak fashion market data in September and October.” Deutsche Bank anticipates a more modest advance of 6%, forecasting a deceleration from a strong 9% start to the quarter to 4% in the second half, citing deteriorating sector data in Europe, where two-thirds of Inditex’s sales are generated.
JP Morgan predicts an 8% betterment in income at local prices, reduced to 3.7% when factoring in currency effects, noting a weaker September and October in Europe. Renta 4 analysts expect a negative currency impact of three points but remain optimistic, anticipating a continued recovery in sales towards normalized levels.
The third quarter is particularly vital for Inditex’s profitability,consistently delivering the highest net profit due to full-price sales occurring outside of summer sales and pre-Black Friday discounting periods.The Bloomberg consensus forecasts a net profit of €1.75 billion, a 4% increase year-over-year and 18% higher than the second quarter of this year. Barclays estimates €1.746 billion (a 3.9% improvement), while JP Morgan offers a more conservative estimate of €1.709 billion (a 1.8% increase).
