Inditex (Zara), profit rises but quarter disappoints and share price falls

Tariffs - and the related uncertainties in the overseas 'marketplace' - volatility in the currency markets, fuelled by trade risks, and 'sluggish' receipts on the spring-summer collection.
Inditex - the clothing giant that owns, among others, the Zara, Bershka and Stradivarius brands - disappointed expectations despite a growing quarterly. Weighed down by declines in first quarter sales and early summer trading, but also by the fallout from tariffs that complicated the fast fashion giant's efforts to maintain solid growth.

Thus, at the opening, Inditex gave up 4.6 per cent on the Madrid Stock Exchange (-0.72 per cent on the Ibex), settling at EUR 47.1 per share, before closing the trading day at -4.41 per cent.

For the first three months of the year, Inditex reported sales up 1.5 per cent to EUR 8.27 billion (+4.2 per cent at constant exchange rates, but below analysts' average estimate of EUR 8.36 billion), while ebitda was EUR 2.4 billion (+1 per cent) and ebit was EUR 1.6 billion (+0.3 per cent). While pre-tax profit remained stable at EUR 1.7 billion, with a pre-tax margin of 20.2 per cent, net profit increased by 0.8 per cent to EUR 1.3 billion (and 'the company expects its growth margin to remain stable in 2025,' said Gorka Garcia-Tapia, head of investor relations at the Spanish company). The 2025 price earning is at 24 while the price on equity is around eight. The company also reported that sales from 1 May to 9 June increased by six per cent (still lower than the 7.2 per cent predicted by analysts). In the released note, it is stated that the board of directors will propose to the shareholders' meeting a dividend of EUR 1.68 per share, which will be distributed in two equal tranches worth EUR 0.84 per share each: the first payment was made on 2 May, the second will take place on 3 November.

Despite the improving quarterly accounts, analysts were expecting a better picture. But worries about inflation recovery and the economic slowdown triggered by US President Donald Trump's tariffs have already dampened buying enthusiasm not only in the US. With volatility in currency markets, Inditex said fluctuations will have a greater impact than expected, with a 3% negative effect on 2025 sales, compared to the 1% reported in March. This is a first 'taste' of the impact of trade tensions on fast fashion ahead of the second quarter.

Inditex did not officially provide an explanation for the weak sales growth. In a statement, it described its performance as 'solid', after describing it as 'very robust' in March, when annual sales were up 10.5 per cent. "The tariff environment is difficult to predict, but Inditex is well positioned to deal with it," Garcia-Tapia said again, in a conference call with investors. "We have a global presence and extensive experience in managing changes in tariff regimes."