Shares of Industria de Diseño Textil, d/b/a Inditex, fell 6% in early Wednesday trade as the clothing retailer's earnings and sales for the fiscal third quarter and beyond underperformed the market consensus. For the three months ended Oct. 31, the owner of brands Zara, Pull&Bear, and Massimo Dutti booked EPS of 0.54 euro from revenue of 9.4 billion euros, down 5% and 2%, respectively, from estimates of RBC Capital Markets.
The analyst mentioned that its forecasts were slightly above consensus. While the company did not provide a reason for the miss, analysts mentioned that severe flooding at the end of October in Inditex's largest market of Spain likely impacted results. Inditex also reported a softer start to the fiscal fourth quarter, with demand for its Autumn/Winter collections driving constant currency store and online sales 9% higher year over year between Nov.
1 and Dec. 9. Against a tough 14% comparable, RBC projected current trading growth at 10%. In the first nine months of fiscal 2024, Inditex underscored its robust operating performance, the creativity of its teams, and the strong execution of the fully integrated store and online business model. Net profit attributable to the controlling company for the nine months ended Oct.
31 increased to 4.45 billion euros from 4.10 billion euros a year ago, while net sales of the Spanish fashion retailer jumped to 27.42 billion euros from 25.61 billion euros. Inditex touted satisfactory development both in stores and online and positive sales in all concepts. While the store count decreased annually to 5,659 from 5,722, the company opened outlets in 45 markets and increased its net cash position by 3% to 11.8 billion euros. "Inditex operates in 214 markets with low share in a highly fragmented sector and we see strong growth opportunities," stated the company.
"We expect increased sales productivity in our stores going forward. The growth of annual gross space in the period 2024-2026 is expected to be around 5%. Inditex sees space contribution to sales as positive in this period, in conjunction with a strong evolution of online sales." Meanwhile, Berstein remarked that the third-quarter results showcased "gentle misses" that could be attributed to high consensus expectations.
"The Group maintains good control over their inventories, which continues to be managed well, and [nine-month] operating expenses grew behind sales growth. Current trading for the [Autumn/Winter] collection is going well with [constant currency] sales growth +9% vs. last year, on a tough comp of +14%, reinforcing their strong fashionability proposition for customers to drive sales growth.".