Inditex

Inditex posted strong Q3 sales and results. Q3 sales grew 8.4% lfl to €9.8bn, beating consensus (€9.69bn) and marking an acceleration (+6.2% over 9 month).  Gross margin expanded 79bps to 62.2%, driving EBIT up 11.2% to €2.4bn. Operating margin improved 137bps to 24.2%, around 120bps ahead of consensus.  

More importantly, Inditex recorded better-than-expected Black Friday trading, with total sales in constant currency between 1 November and 1 December up 10.6%, marking a clear acceleration vs the previous quarter and exceeding both our and market expectations. For FY 2025, Inditex expects gross margin to be stable (+/- 50 bps) with CAPEX at €1.8bn.

Very strong results and momentum are encouraging. We continue to view Inditex as the best-in-class stock in the fashion segment, with a second-to-none growth profile and cash-generation capacity. Yet we believe that these excellent fundamentals are partly priced in, and we see only 6.5% upside — even though consensus forecasts will likely have to move higher after such a clear beat and a strong start to Q4.

One question mark remains: Can Inditex continue to outpace the market over the long term? Growth is becoming structurally more challenging as its market share is already significant. Moreover, it faces rising competition from newcomers like Temu, Shein and others. If anything, this exceptionally strong release should keep these concerns at bay, at least in the short run.