Rare quarterly failures hit Zara’s owner, Inditek, reports Reuters

Authors: Corina Pons and Helen Reid

MADRID (Reuters) – Owner of Zara Inditek (BME: ) posted a rare miss in quarterly sales and profit on Wednesday, although the world’s biggest publicly traded fast fashion retailer said the holiday shopping season was off to a good start.

Inditex shares fell about 5% as investors took stock of results hit by currency fluctuations and flooding in Spain, Inditex’s biggest market.

Third-quarter sales of 9.36 billion euros ($9.84 billion) were below the 9.51 billion expected by analysts. The 8.5% increase in nine-month net profit to 4.44 billion euros also fell short of the 4.52 billion expected by analysts.

“While the numbers aren’t too bad, they don’t meet the company’s growth line and show a bigger slowdown than we estimated,” KSTB analyst Javier Cabrera said, adding that next year brings new risks such as U.S. trade tariffs that are likely to increase inflation. .

Severe flooding in late October in Spain had a “very limited” impact on Inditex’s performance, with three stores closed, capital markets director Marcos López told analysts.

But a strong dollar and a weak euro are hurting results, analysts say, since Inditex makes most of its sales in euros.

“Despite the quarterly setback, affected by the weather and the exchange rate, I believe the company continues its growth trajectory,” said Xavier Brun, portfolio manager at Madrid-based Trea Asset Management, which holds Inditex shares.

Zara is investing in bigger stores, logistics centers and marketing, launching a collection with supermodel Kate Moss, as it tries to maintain an edge over fast-fashion rivals such as H&M ( ST: ) and Shein, which sell at lower prices.

Inditek reported a 9% rise in currency-adjusted revenue in the six weeks to December 9, which includes key Black Friday sales, slower than the 14% sales growth reported a year ago.

“We had a strong start to the last quarter versus a challenging comparable for the same period in 2023,” Lopez told Reuters. He also said that Inditex expects less impact from currency fluctuations in its fourth quarter.

In a sign of the market’s confidence in the company, Inditex shares are trading at around 26 times expected earnings over the next 12 months, above H&M’s price-to-earnings ratio of 19.3 times.

Shares are up 32% year-to-date.

(1 dollar = 0.9500 euros)