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Inditex held up well in face of the weak Spanish and European economies in 2009. The Group is about to come back to pre-crisis growth rate s . International expansion (dynamic emerging countries), an efficient cost-cutting plan (€75 million), “value for money” positioning and a less negative situation in Spain are all factors which hold out the promise of strong growth in 2010/11.
2009 results were better than expected at every level; this should be enough to convince the last remaining sceptics that the business model is good. 2010 has got off to a strong start: sales +14% (+6-7% in organic terms) and stabilization in Spain (32% of sales). The strong presence on emerging markets plays a driving role and is a growth reservoir for the future. Over and above the gross margin which is set to benefit from this greater internationalization and the favourable trend of the dollar parity, cost cutting is set to continue. Prospects for the coming year are looking good!
The deterioration of the loan market in Spain and negative macroeconomic figures are hitting the Spanish stock market hard. Inditex has suffered an 8% fall in the past two days. While its exposure to Spain (30% of sales in 2009) may generate uncertainties, we believe that 1/The Spanish situation must be put in perspective and 2/ The dominant role of the emerging markets mitigates the influence of the Spanish situation. We regard the fall in value of Inditex as an opportunity to take up a new position on this share. PLUS code confirmed.
Salient features of the Q3 results are a better than expected operating result and net profit even if organic sales growth was slightly below target (weather too mild for the winter collection). In the first 6 weeks of Q4 sales were up 9% at constant exchange rates, i.e. implicit organic growth between +1.5% and +3%: a distinct improvement on Q3. In view of the dynamism of emerging countries, benefits of the cost-cutting program (€75 million) and “value for money” positioning, Inditex offers promising growth prospects for the next two years. PLUS code confirmed.
Inditex held up well in face of the slowing European and Spanish economies in 2009. Thanks to greater internationalisation (dynamism of emerging countries), a new cost-cutting plan (€75 million), its “value for money” positioning and a potential economic upturn in Spain, growth prospects for the next 2 years look promising. We reiterate our code PLUS on the share.
Results for first half 2009 (close, end July) are above expectations on all measurements (sales LFL basis, EBITDA, net income). The second quarter was characterised by resistance better than forecast for organic growth (-1% vs -2/-3%) despite a difficult Spanish market (-8%). The first 6 weeks of the third quarter are seeing sales with steady increases of 9%, which adjusted for the effect of opening new stores yields stable LFL growth: recovery is underway and the outlook for second half 2009 is attractive. We repeat our Plus rating.
Q1 results are characterised by a better than anticipated performance in terms of organic growth (-1/2% versus -3/4%). In addition, the trend for the first 5 weeks of Q2 shows sales up by +9% at constant exchange rates which, coupled with the effect of store openings, puts organic growth at -1/0%: a remarkable performance in the current context. The strength of the Inditex business model is therefore confirmed once again and hints at good prospects, even though 2009 will be a difficult year. Plus code reiterated.
Performance reported in 2008 proves that the group is strong enough to resist the sharp slowdown of the Spanish and European economy. Without dismissing this risk, which is still present today, we believe that Inditex is much better protected than its competitors thanks to “value for money” positioning, greater internationalisation, the impact of its productivity plan (Reduce 3) and new cost-cutting measures (€75 million) which enable it to envisage a further progression of its cash flow and net treasury in 2009.
2008 results are strong, removing fears of a lower operating and net profit. Good news: like for like sales are stable (consensus -1/-2%) and the gross margin has held up well (+14 bp at 56.8%) exceeding the original objective of stability. The start of the year is reassuring and priority in 2009 will be given to cost and cash management. The management hopes to achieve €75 million worth of savings (new plan) and is committed to higher FCF and net cash resources. Plus code confirmed.
Q3 results are solid. Despite the economic slowdown, sales growth in Q3 did not slacken against H1 (+11% published, +1% LFL ), while the gross margin has improved (+46bp) over 9 months. The announcement of a similar sales growth trend for the first 6 weeks of Q4 comes as a very pleasant surprise. That performance highlights the lower dependence of Inditex on the domestic market, the success of increased internationalisation and the impact of the Reduce 3 cost-cutting plan. PLUS code confirmed.
The solid performance reported in 2008 proves Inditex’s resilience to the sharp slowdown of the Spanish economy. Without dismissing this risk, which is affecting the whole of Europe today, we believe that Inditex is much better protected than its competitors thanks to “value for money” positioning, greater internationalisation and the benefits of its productivity plan (Reduce 3).
First half-year results are solid. Despite the economic slowdown in Spain, the group’s organic growth remained positive (+1%) and its gross margin improved (+75bp). A performance such as this underlines the lesser dependence of Inditex on the domestic market, the success of increased internationalisation and the positive effect of the Reduce 3 savings plan. The good start registered by the autumn collection (sales growth in the middle of the third quarter close to that of the first half-year) is reassuring, but does not remove the risk inherent in the European economic slowdown. PLUS code reiterated.
The performance reported in 2007 proves that the group is strong enough to resist the Spanish economic slowdown. Without dismissing this risk which is affecting the rest of Europe in 2008, growth prospects underpinned by greater internationalisation, the impacts of the productivity plan (Reduce 3) and the attractive valuation, explain our confidence in this share.
Inditex has published its results for 2007. These confirm the slower growth of business activity with a constant scope of consolidation (+5%; +15% reported) but are better than expected for the operating profit and net profit. This performance shows that the group is proving resilient in face of Spanish economic slowdown. The effects of the productivity plan (Reduce 3) and the management’s reassuring message (sales up 17% at the beginning of 2008 at constant exchange rates) underpin our confidence in this share. PLUS code confirmed.
This morning, Inditex published its results for the 1st half of 2007 (6 months ending 31 July); they were better than expected. The numbers are all satisfactory: for sales growth (+19%, +7% against the comparable period last year), gross margin improvement (+80bp) and net profit (+33% to 393 million €). This reassuring performance, visibility of top line growth (7 weeks of the 2nd half in line/no slowdown in Spain) and the impact of the productivity gains plan (Reduce 3) all underpin our optimistic view for 2007/2008. PLUS code confirmed.
The 2006 results are better than the market had expected; the strong operating result (+24% at €1.36 billion) which has grown faster than sales (+21.6%) came as a pleasant surprise. This performance and the stability of the gross margin at 56.2% strengthen the management’s credibility over improved cost control. Beyond the good visibility of business growth, the effects of the productivity improvement plan (Reduce 3) and a more favourable base (currencies/costs) makes us even more optimistic for 2007. PLUS code maintained.
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