Source: Company reports/Coresight Research

9M18 Results

Spanish apparel group Inditex reported revenue growth of 2.6% year over year, to €18.4 billion, in the nine months ended October 31. Excluding a currency impact of 4.3%, the company grew sales by 7% during the period. Inditex grew gross profit by 4% year over year, resulting in margin expansion of60 basis points, to 58.0%. The company stated that year-over-year gross margin growth of 108 basis points in the third quarter alone was due to its limited participation in promotions and discounts typically seen in the sector during the period. Operating expenses grew by 4%, reflecting a 60-basis-point increase in the SG&A margin, to 41.4%, and flat operating margin growth. Inditex remarked that operating expenses were “tightly under control” and that growth in sales and startup costs led to the increase in operating expenses. Comparable sales in the first four months of 2H18increased by 3%,following “a good start to the season” and a particularly warm September.Comps grew by 5% in October and November alone, according to Inditex. In 9M18, EPS was €0.78,up 4.1% year over year, and net income grew by 4% versus the 9M17 period. In the nine-month period, Inditex opened stores in 51 markets. The group operated 7,442 stores across 96 markets as of October 31.The group continued with its rollout of online sales for Zara and launched in 106 new markets in November.

Outlook

Inditex maintained the guidance it provided when it announced its 1H18 results. The company expects:

• Gross margin expansion of about 50 basis points.
• Same-store sales growth of 4%–6%.

Inditex plans to make all eight of its brands available online worldwide by 2020. Consensus estimates call for FY18 revenue growth of 5.5%, operating income growth of 3.9% and EPS growth of 4.4%.