Inditex maintained solid operational momentum during the first half of fiscal year 2026, delivering strong top-line growth and expanded margins across its core international markets.
James Grzinic (Jefferies) says: ITX’s Q2 confirms an 8.1% YoY EBIT gain (3% shy of cons largely due to dd opex increases) as org growth of 9.5% was accreted by gm expansion of 22bps partly diluted by ope increases in excess of 10% (perhaps reflecting distribution cost inflation). Current trading of 9% is impressive given the likely impact of weather pushing demand for transition garments later into the Autumn (and likely points to the growing impact of refurbished space). A reiterated guidance on both gm and fx should see cons expectations maintained for H1. We recently reiterated that the visibility of accelerating support from the deeper refurbishment programme and the likely inflationary impact from changes in the EU’s regulatory backdrop should provide strong underpins to ITX’s dd TSR. Today’s update provides confirmation of those attractions and the potential for some multiples expansion (from 23.3x cal 2027 PE, dropping to 21x in 2028) to be added to ample shareholder returns. Call at 8am UK time.
A strong Q2 despite EBIT 3% below cons… sees ITX report on a translation fx dilution-free quarter for the first time in over three years. We expect the benefit of the deeper (and higher capex) refurbishment programme to have been a growing enabler. On the numbers:
- Q2 (May-July) Sales/Ebit/Net were €11.01bn/€2.09bn/€1.61bn vs VA cons of €10.90bn/€2.16bn/€1.69bn (with buyside broadly aligned);
- Q2 org growth came in at +9.5% vs VA on 8.9% and buyside like slightly above 9% (this after +11.5% in the first five weeks of Q2);
- Q2 gm +22bps YoY (cons +31bps) and opex growth inc fx/D&A of +10.3% (cons +7.5%); on the latter D&A seems to have grown as expected;
Closing inventories were +9.3% YoY vs reported growth of +7.6%; closing net cash of €10.4bn is +4% YoY.
…and reiterated guidance inputs which confirm flat gm for the FY (-50bps/+50bps and against +40bps in H1; this vs cons of +47bps) and fx of -1% (was -1.6% in H1 and cons assumes -1%). On current trading (Aug 1 to Sep 7) org growth was +9% vs VA cons 7.2% (for the whole of Q3) and we think buyside at between 6% and 7% (given warm weather in Europe).
