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MarketScreener Homepage  >  Equities  >  Bolsa de Madrid  >  Inditex - Industria de Diseño Textil    ITX   ES0148396007

INDITEX - INDUSTRIA DE DISEÑO TEXTIL (ITX)
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Inditex : Annual Results Weaker, But Still a Cut Above the Rest -- Update

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03/14/2018 | 08:43am CEST

By Jeannette Neumann

A CORUNA, Spain--Zara's parent company reported annual results on Wednesday that were weak for the fashion behemoth but better than many competitors, distinguishing Inditex SA (ITX.MC) as a company that has been able to stand firm against the headwinds battering the retail industry.

Spanish company Inditex said its net profit was 3.4 billion euros ($4.16 billion) in the fiscal year ending Jan. 31, a 7% rise from the year-earlier period. Inditex said its board of directors plans to ask shareholders to approve a 10.3% annual increase in the dividend to EUR0.75 a share.

Sales in stores that have been open for a year or more rose 5%, a marked slowdown from the 10% growth reported the previous period. Inditex's 5% annual growth in like-for-like sales, as the metric is known, is the slowest since 2015, when the figure also rose by 5%.

What is sluggish growth for Inditex, though, is still better than many of its peers. Analysts expect Sweden's H&M Hennes & Mauritz AB (HM-B.SK), for instance, to report a decline in like-for-like sales later this month. Like-for-like sales at Zara's parent company continued to be weak in the first six weeks of the new reporting period, rising an estimated 4% from Feb. 1 to March 11.

"The colder weather compared to last year across Europe had a negative impact and Inditex will not be the only clothing retailer to have suffered," Societe Generale analyst Anne Critchlow wrote in a research note.

Despite the decline in Inditex's key profit metric--the company reported an annual gross margin of 56.3%, the lowest in a decade--analysts aren't worried about Zara's ability to continue expanding and boosting sales even as its competitors flail. Much of the financial travails at Inditex, whose eight brands include Massimo Dutti and Bershka, are linked to currency fluctuations.

Zara's parent company generates more than half its sales in more than five dozen non-euro currencies, but produces most of its products in Spain, so the weakening of those currencies against the euro has chipped away at revenue reported in euros.

Since Inditex went public in 2001, the Spanish company has seen 12 fiscal years of net negative effects from currency movements, dealing an average hit of 1.7% to sales growth, Ms. Critchlow wrote in a February research report.

Currency ups and downs are the price Inditex has to pay for its presence in more than 94 markets. Yet those fluctuations don't undermine what analysts and investors say has underpinned Inditex's expansion and ability to outpace competitors: a rapid-fire production and distribution system that turns around designs in weeks and refreshes its more than 7,475 stores around the world with new items twice a week.

Inditex's business model has also allowed it to respond to growing demand from online shoppers, and it provided details on internet sales for the first time on Wednesday, saying that online sales grew 41% in the year ending Jan. 31. Online sales made up 10% of total annual sales, Inditex said.

Write to Jeannette Neumann at jeannette.neumann@wsj.com; @JENeumann

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Financials (€)
Sales 2019 27 079 M
EBIT 2019 4 530 M
Net income 2019 3 535 M
Finance 2019 6 918 M
Yield 2019 2,84%
P/E ratio 2019 24,38
P/E ratio 2020 22,00
EV / Sales 2019 2,95x
EV / Sales 2020 2,67x
Capitalization 86 830 M
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Mean consensus OUTPERFORM
Number of Analysts 36
Average target price 31,4 €
Spread / Average Target 14%
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Managers
NameTitle
Pablo Isla Álvarez de Tejera Chairman & Chief Executive Officer
Carlos Crespo González Chief Operating Officer
José Ignacio Fernández Chief Financial Officer
Gabriel Moneo Marina Chief Information Technology Officer
Amancio Ortega Gaona Non-Executive Director
Sector and Competitors
1st jan.Capitalization (M$)
INDITEX - INDUSTRIA DE DISEÑO TEXTIL-4.94%98 359
KERING18.12%66 703
FAST RETAILING CO LTD5.84%46 186
ROSS STORES13.41%34 269
ZALANDO1.55%12 633
GAP-3.99%12 070