INDITEX, the owner of Zara, reported slower sales growth at the outset of the crucial holiday shopping season.
The Arteixo, Spain-based retailer said revenue, excluding currency swings, grew 9 per cent in the five weeks to Dec 9, compared with 14 per cent a year earlier. It was also slower than the 10.5 per cent sales growth achieved by the company in the nine months to October.
Inditex has been a standout performer among Europe’s clothing retailers, as rivals struggled with unseasonably warm weather and weak demand in key markets. The company’s tightly managed supply chain allows it to get the latest and most popular products in and out of stores quickly, making it more agile on both fashion trends and potential headwinds.
The retailer had a stellar post-pandemic run, but the pace has slowed slightly since then. Operating income rose 5 per cent to 2.13 billion euros (S$3 billion) in the third quarter, just shy of analysts’ estimates. Gross margin, a measure of profitability, also came in below expectations in a quarter typically marked by higher ticket items like coats and jackets and few markdowns.
The shares hit a record high on Dec 5 and have climbed 40 per cent since the year began, more than twice the increase in Bloomberg’s index of European retailers. Its market capitalisation of about 170 billion euros makes it the most valuable company in Spain.
“The group’s impressive growth credentials look confirmed” by the results, Jefferies analysts led by James Grzinic said in a note to clients. “But the shares likely needed a better print to prevent some profit-taking today.”
Inditex maintained its guidance that currency movements would trim 3 per cent of sales in 2024, but said that they had weighed on third-quarter revenue.
“These headwinds appear to be moderating in Q4 and at current exchange rates we expect a lower currency impact on Q4 sales,” Capital Markets Director Marcos López told Bloomberg by email. BLOOMBERG
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