Italian fashion house Inditex (ES:ITX) posted strong results for the nine months ended October 31, 2023, and lifted the margin outlook for FY23. Inditex’s net profit rose 32.5% year-over-year to €4.1 billion in the period, driven by an 11.1% sales jump and improved margins. ITX shares are up 1.5% on the news at the time of writing.
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Inditex, or Industria de Diseño Textil, S.A., is a Spanish multinational clothing company boasting brands such as Zara, Bershka, and Massimo Dutti.
Inditex’s Trading Update
Inditex’s EBIT (earnings before interest and tax) came in at €5.19 billion in the first nine months of FY23, significantly up from the €4.18 billion in the prior year period. The company highlighted that sales during the period were encouraging across all geographical areas and concepts. Moreover, the company’s sales (on a constant currency basis) from November 1 until December 11, which includes the Black Friday holiday, grew by 14% compared to the same period last year.
In the first nine months of Fiscal 2023, gross margin expanded by 67 basis points from the comparable period of the previous fiscal year. Based on the ongoing momentum, Inditex expects its full-year gross margin to be 75 basis points more than last year’s level. Earlier, Inditex had forecasted FY23 gross margin to remain stable.
The company’s efforts to optimize its store footprint and focus on larger, more appealing stores have helped it improve margins. Moreover, the company has been enhancing its logistics to ensure faster deliveries of online orders.
Is Inditex a Buy?
Analysts are giving mixed opinions following Inditex’s results. Jefferies analyst James Grzinic reiterated a Buy rating on ITX shares with a price target of €40 (3.6% upside). On the contrary, Deutsche Bank analyst Adam Cochrane reiterated a Sell rating on Inditex shares with a price target of €35 (9.4% downside).
Overall, ITX stock has a Moderate Buy consensus rating on TipRanks backed by eight Buys, three Holds, and one Sell rating. The Inditex share price forecast of €38.79 implies that shares are almost fully valued at current levels. Year-to-date, ITX shares have gained 55.5%.
