Zara Owner Inditex Profit In Line on Decelerating Sales

Fashion retailer Inditex SA was the best-performing stock in Europe after it said shoppers had been snapping up its spring and summer fashions despite poor weather across Europe that’s hampered rivals.

The Zara owner’s upbeat start to the season comes as it reported quarterly sales and profit that met expectations, with growth decelerating on tough comparisons and a weak consumer environment.

The shares rose 4.8 percent at 9:14 a.m., after jumping as much as 5.3 percent at the opening in Madrid.

Sales rose 12 percent at constant exchange rates from May 1 to June 3, in a sign that the second quarter is going better than expected. The Arteixo, Spain-based company also posted operating income of €1.6 billion ($1.74 billion) in the three months to April 30, meeting the average estimate from analysts.

Inditex stood out from its peers in the period immediately following the pandemic, posting double-digit sales increases while also improving profitability despite weak consumer sentiment and inflation.

Its trading update for the first five weeks of the second quarter offered a surprise on the upside, with a figure higher than the first quarter’s sales growth and closer to the level achieved in full-year 2023.

The update marks “an impressive start” to the second quarter, Jefferies analyst James Grzinic said, noting that he expected “modest upgrades to consensus” as a result.

The group’s net cash position increased slightly from the previous quarter to €11.6 billion.

Investors are looking for signs that the group’s stepped-up capex program will not dilute its returns. The company plans to spend €1.8 billion on improving stores and technology, as well as another €1.8 billion on increasing logistics capabilities. By the second half of 2025, the firm is set to have an additional 7.2 million square feet of distribution space including more capacity for Zara, Bershka and footwear.

Inditex shares are up about 11 percent so far this year and hit an all-time high in March. The share price has more than doubled since 2022.

By Clara Hernanz Lizarraga

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