Inditex (ITX) today holds its Annual General Meeting of Shareholders where, amongst other matters, it will approve the payment of a gross dividend of 0.70 euros per share. This will be divided into an ordinary dividend of 0.22 euros gross per share and an extraordinary dividend of 0.48 euros gross per share. On the occasion of the AGM, in an interview with the newspaper Expansión, Inditex Chairman, Pablo Isla, gave an update on the company’s future strategy. According to him, the digital growth of ITX, the full integration of physical and online shops and sustainability will be the pillars of this strategy. Isla stresses there is no element of online sales that is detrimental to them, and it has a positive cash flow effect. ITX will reinvest the cash it generates in the future in the company’s business and in incremental shareholder remuneration. Isla said the pay-out will remain at 60% of profit, but ITX will supplement this with extraordinary dividends.
ITX closed 2020 with sales of over 20.4bn euros (vs 28.286bn in 2019), EBITDA of 4.612bn (vs 7.664bn in 2019) and profit of 1.162bn (vs 3.721bn in 2019).
According to Renta 4 analysts, in the first quarter of 2021, ITX’s results exceeded forecasts in the main figures: (i) sales “only” -17% vs Q1’19, (ii) gross margin 59.9% (+150 bps vs Q1’20 and 50 bps vs Q1’19), (iii) operating expenses much lower than revenue growth and -7% vs Q1’19, in a quarter with 24% less commercial hours available.
For Renta 4 “Sales are recovering as the reopening of shops consolidates (98% vs 84% at end Q1’21). Sales from May to June 6 rebounded +102% vs same period 2020 and, for the first month since Covid 19, in May sales exceeded the 2019 level (+5%)”.
And they revise their forecasts for the company: “We revise our 21/23e sales forecast to around +19%/+20%, we improve gross margin +0.5/+0.9 pp and Ebitda to around +40% over the next 3 years. We believe Inditex is in a better position to recover its 2019 level of activity sooner than previously expected. However, we consider that the stock is trading at demanding multiples (P/E ratio 21e 27.6x, EV/Ebitda 21e 12.2x, FCF yield 21e 3.0%).
