Inditex shares rise on strong first-half results by Investing.com

Investing.com — Shares of Zara’s parent company, Inditex (BME: ) rose on Wednesday after reporting its first-half results, with net income up 10.1% year-on-year to 2.8 billion euros.

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

Sales for the period rose by 7.2% to €18.1 billion. 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 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,” analysts at RBC Capital Markets said in a note.

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

The company also reported an 8.1% increase in EBITDA to €5.0 billion, an 11.9% increase in EBIT to €3.5 billion and a 10.6% increase in profit before tax (PBT), reaching EUR 3.6 billion.

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

Inditex’s operating performance also boosted its cash flow, with funds from operations before income tax rising 9% to 4.4 billion euros.

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

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

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

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

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

In addition, 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 euros annually to increase logistics capabilities in both financial years.