Zara owner Inditex shares slide after slower start to first quarter

Zara owner Inditex on Wednesday reported a slower start to its first quarter starting February 1, raising questions around its ability to keep building on rapid recent growth and sending its shares down more than 8 percent in early trading.

Strong sales from Zara, which has been gaining market share from rivals such as H&M, have led to a doubling of Inditex's share price over the past three years. However, the stock has recently faced challenges due to growing concerns about weakening consumer demand.

Inditex sales were up just 4 percent in currency-neutral terms over the February 1 to March 10 period, compared to 11 percent growth a year ago. Sales will have to accelerate significantly to meet analysts' forecast of 8.8 percent growth for the first quarter, Bernstein analyst William Woods said.

Inditex gave no reason for the slower growth, but businesses have been warning of weaker demand, particularly in the United States, Inditex's second-biggest market by sales after Spain.

"The current environment is difficult to predict in terms of tariffs, of course we are continuously monitoring the situation, however we consider that we are in a very good position due to our levels of geographical diversification in terms of sourcing and sales," chief executive Oscar Garcia Maceiras told analysts.

Maceiras played down the recent slowing growth, saying comparables over the past two years have been high and this was only a short period at the start of the season. "We are confident in our execution for the year ahead," he said.

The company reported a 10.5 percent growth in full-year sales in currency-neutral terms, amounting to 38.6 billion euros (HK$326.97 billion). The key holiday shopping quarter saw sales of 11.2 billion euros, in line with analysts' expectations.

"Inditex can no longer grow in sales at the rate we were used to," said Xavier Brun, portfolio manager at Madrid-based Trea Asset Management, which holds shares in the group.

"But the market reaction is excessive," he added. "Inditex is investing heavily in logistics and this will allow it to gain efficiency, although consumption may fall in the coming quarters."

In comments on its 2025 outlook, Inditex said it had a "strong commitment to profitable growth" after net profit for 2024 grew 9 percent to 5.9 billion euros.

Inditex, which also owns the Bershka, Pull&Bear, Massimo Dutti, Stradivarius and Oysho brands, said it would hike its dividend by 9 percent to 1.68 euros per share.

REUTERS