Spanish fashion giant Industria de Diseño Textil, known as Inditex, experienced an 8% decline in shares on Wednesday morning, signaling a slower start to the fiscal year 2025 after a robust performance in fiscal 2024. The owner of Zara reported that adjusted sales across both physical store locations and online platforms saw a growth of only 4% year-over-year in constant currency between February 1 and March 10, a figure that falls short of the impressive 11% annual growth achieved in the previous year. Analysts from Deutsche Bank commented on the situation, stating: "Current trading for the period from February 1 to March 10 is currently up 4% in constant FX, which lands below the lower end of the range we have previously communicated to investors.
However, trading figures for the last week of this period showcased a modest rebound, reaching +7% in constant FX, yet this still does not meet our expectations." This lag in performance comes after an exceptionally successful growth period in the fiscal year that concluded on January 31. Inditex's net income attributable to the controlling entity soared to 5.87 billion euros, up from 5.38 billion euros a year prior—aligning closely with FactSet's consensus estimates.
Furthermore, net sales experienced an increase, reaching 38.63 billion euros, barely exceeding the previous year's figure of 35.95 billion euros and surpassing the consensus expectation of 38.57 billion euros. Store sales grew by 5.9%, benefiting from increased customer footfall and enhanced productivity as Inditex expanded its footprint to 47 markets in 2024.
The company has also intensified its store optimization strategy, involving refurbishments, expansions, and new store absorptions. Online sales witnessed a remarkable 12% surge, totaling 10.2 billion euros, reflecting high levels of customer engagement, according to the company. By brand, Zara continued to dominate sales, contributing 27.78 billion euros, followed by Bershka and Stradivarius with sales of 2.93 billion euros and 2.66 billion euros, respectively.
Yet, operating expenses took a hit, rising 6.5% to 11.56 billion euros as the company executed its comprehensive integrated business model. In light of its strong financial performance, Inditex’s board has recommended a dividend of 1.68 euros per share, up from 1.54 euros per share, to be distributed in two equal payments.
Looking ahead, Inditex forecasts an annual growth in gross space of 5% from 2025 to 2026, with anticipated capital expenditures for the year approximately 1.8 billion euros in 2025. However, analysts at Bernstein have raised alarms regarding the company’s slower exit rate. They caution that the consensus forecast for the first quarter of 2025 might necessitate downward revisions: "The Q1 consensus is likely to decline due to market weaknesses, potentially alarming investors regarding FY25 growth expectations of 8.9%," the research firm indicated..