Inditex shares rise on strong H1 results

Investing.com — Shares of Zara’s parent company, Inditex (BME:) jumped on Wednesday after it reported its first half results with net income jumping by 10.1% year-over-year, to €2.8 billion.

At 3:15 am (0715 GMT), Inditex was trading 3.7% higher at €48.

Sales for the period rose by 7.2% to €18.1 billion. When measured in constant currency, sales growth was even stronger at 10.2%. 

The company’s integrated store and online business model saw strong demand, with sales growth across all concepts and regions. 

The company’s Spring/Summer collections were particularly well-received, contributing to these results.

“Inditex has reported its H1 results this morning with Q2 EBIT ahead but EPS a shade below our estimate, and recent trading in line with our forecast,” said analysts at RBC Capital Markets in a note. 

Gross profit rose by 7.5%, reaching €10.5 billion, with a gross margin of 58.3%, an improvement of 19 basis points compared to the same period in 2023. Operating expenses increased at a slower pace than sales, rising 6.8%.

The company also reported an 8.1% jump in EBITDA to €5.0 billion, a rise in EBIT by 11.9% to €3.5 billion, and a 10.6% growth in pre-tax profit (PBT), reaching €3.6 billion.

“Q2 EBIT is 4% above our estimate due to lower D&A, but Q2 EPS was 1% lower due to higher interest charges due to negative fx,” RBC said.

Inditex’s operational performance also bolstered its cash flow, with funds from operations before corporate income tax rising 9% to €4.4 billion. 

“At current exchange rates, Inditex expects a -3.0% currency impact on sales in 2024,” the company said. 

The company’s net cash position stood at €10.9 billion at the end of the first half, a 3.5% increase compared to the same period in 2023.

“We presume consensus changes will be relatively modest today given the tempering impact of FY fx guidance deteriorating from -2% to -3%,” said analysts at Jefferies in a note.

Between 1 August and 8 September, store and online sales in constant currency rose by 11% compared to the same period in 2023. 

“For 2024, we are making investments that are scaling our capabilities, generating efficiencies, and increasing our competitive differentiation to the next level. We estimate ordinary capital expenditure of around €1.8 billion,” the company said in a statement. 

Additionally, Inditex is implementing a logistics expansion plan for 2024 and 2025. This two-year investment program, aimed at expanding the business, will allocate €900 million annually to increase logistics capacities during both financial years.