Spanish clothing retailer Inditex (ITX:BME) has transformed itself from a humble textile maker into a global fashion titan with a reputation for being on-trend and quick to market and can usually be relied upon to meet or beat forecasts.

But the Madrid-listed shares were under pressure on 11 December, falling 5% to €52 after the fashion house’s third quarter sales and earnings missed analysts’ estimates.

And with the crucial Christmas shopping season in full swing, the Zara-to-Bershka brands owner said sales growth slowed to 9% in the five weeks to 9 December from 10.5% in the first nine months of 2024.

RARE QUARTERLY MISS

Third quarter sales from Inditex, which also owns the Massimo Dutti, Pull & Bear and Stradivarius brands, rose 11% at constant currency.

That was just shy of the 12% anticipated by analysts and likely impacted by the recent shocking floods in Spain, Inditex’s biggest market.

The sales miss, combined with a lower gross margin, meant the Arteixo-headquartered firm’s third quarter EBIT (earnings before interest and tax) fell short of forecasts.

SHOWING RESILIENCE

Turning to current trading, Inditex insisted its Autumn/Winter collections ‘remain well received’ by its customers as it reported a 9% uplift in sales between 1 November to 9 December, which included the key Black Friday sales.

Given the poor weather conditions and tough consumer backdrop in the period, this revenue uplift demonstrated the resilience of Inditex and its fashion brands.

Nevertheless, this sales growth was at the lower end of expectations of around 9% to 10% and represented a slowdown versus the 14% revenue growth reported a year earlier.

Inditex’s management offered no change to guidance, instead reiterating that gross margins are still expected to remain stable.

THE ANALYST’S VIEW

Mamta Valechha, consumer discretionary analyst at Quilter Cheviot, stressed that while third quarter results were a slight miss, when put into the broader context of the consumer discretionary sector, Inditex’s numbers still look ‘relatively solid. However, given the high expectations going into this print, especially after the strong run the stock has had this year, there is no surprise that there is some profit-taking this morning.’

Valechha added: ‘Some may consider this print to be an indication that the Black Friday sales period was softer than what headlines suggested, but Inditex has a tough 14% comparator for the first few weeks of the quarter which later eases. Inditex also made no reference to any impact from the Spanish floods, but this is likely to have been a headwind.

‘Ultimately, today’s results do not change the story. Inditex remains one of the best-in-class retailers with a strong business model which we expect to continue performing well.’

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