Morgan Stanley| Our analysts have studied the impact of the Red Sea conflict-related transportation issues on 17 retail companies. The average impact is 7% of pre-tax profit on average if rates stay where they are. Estimating a 150% increase in freight rates, the impact on pre-tax profit is -2% in food, -6% in clothing and -14% elsewhere. All this before mitigations. Most companies know how to manage the impacts of freight increases after the COVID experience and the supply-demand situation is much healthier now. Food retailers such as Tesco, Jeronimo or Ahold are holding up quite well with an impact of less than -2%, while, in apparel, Inditex is more protected, and Grace believes that its great operating model and strong balance sheet will allow it to more than overcome this challenging environment, maintaining an above average growth rate. On the other hand, Adidas or M&S are more affected. Among the general merchandise retailers Pepco and Kingfisher are the worst hit.
Inditex will more than overcome impact of Red Sea conflict, growing above peers’ average
