Q1 sales beat expectations

Over Q1, the Spanish textile giant's net profit rose 5.4% to €1.4bn, while operating profit grew 7% to €1.8bn. This resulted in a 24bp improvement in its margin to 20.1%, in line with the market consensus.

Revenue rose 5.8% to €8.75bn, slightly exceeding the €8.72bn consensus. Sales growth in local currencies reached 8.8%, a performance that Jefferies also noted was better than anticipated.

"Inditex maintained a solid operating performance, driven by the creativity of our teams and the strong execution of a fully integrated business model," explained the parent company of Zara, Pull&Bear, and Massimo Dutti, highlighting the very positive reception of its spring/summer collections.

This sales growth was accompanied by a 67bp improvement in gross margin to 61.2%, surpassing the consensus of 60.8%. Tight cost control also limited the increase in operating expenses to 6.4%.

A vigorous start to Q2

Beyond what it described as a "resilient" Q1, Jefferies welcomed a vigorous start to Q2, with sales growth of 11.5% between May 1 and June 1. The broker says that even the most optimistic analysts were only expecting a 7%-to-8% increase for the current quarter as a whole.

"Inditex notes that this figure was boosted by an unspecified calendar effect," the broker added, pointing out that Pentecost fell in May this year, whereas it occurred in June last year.

"The flexibility and responsiveness of our business, combined with in-season proximity sourcing, allow for a rapid reaction to fashion trends and reinforce our unique market position," Inditex stated regarding its outlook.

"The group's growth is supported by continuous investment in our store network, advancements in the online sales channel, and improvements to logistics platforms, with a clear focus on innovation and technology," the company continued, noting the increasing integration of AI into its operations.