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Industria De Diseno Textil SA ITX

Rating as of

Morningstar’s Analysis

Valuation
Currency in EUR
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Is it the right time to buy or sell?
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1-Star Price

PREMIUM

5-Star Price

PREMIUM

Economic Moat

PREMIUM

Capital Allocation

PREMIUM

Inditex’s Recovery From COVID-19 Restrictions Accelerates Pace, Shares Now Fairly Valued

Jelena Sokolova, CFA Equity Analyst

Analyst Note

| Jelena Sokolova, CFA |

We are maintaining our fair value estimate for narrow-moat Inditex as the company reported first-quarter (from Feb. 1 to April 30) results with a 56% lift in sales from 2020 levels at constant currencies. Sales in constant currencies were still 11.5% below the levels reached in 2019 as 24% of trading hours were unavailable through lockdowns and restrictions. Sales trends continued to improve in May, growing 5% against 2019 comparables from May 1 to June 6, despite a 10% reduction in trading hours. We are comfortable with our assumptions for Inditex revenue to outstrip 2019 levels by 2022. After rising by more than 20% from the start of the year, we believe shares are fairly valued, trading in 3-star territory.

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Company Profile

Business Description

Inditex is a multibrand fashion conglomerate, founded in 1985. Zara is its flagship brand (including Zara Home), generating just under 70% of revenue and just over 70% of profits. Other brands include Pull & Bear, Massimo Dutti, Bershka, Stradivarius, Oysho, and Uterque. The company operates through 7,000-plus stores globally, over 2,000 of them belonging to the Zara brand. Sixty-five percent of revenue is generated in the European home market, while the Americas and Asia contribute 16% and 19%, respectively. The company keeps design in house while mostly outsourcing manufacturing (own manufacturing constitutes only a low-single-digit percentage of output). Over 50% of sourcing factories are in proximity to the company's headquarters in Spain.

Contact
Edificio Inditex, Avenida de la Diputación
Arteixo, 15142, Spain
T +34 981185400
Sector Consumer Cyclical
Industry Apparel Retail
Most Recent Earnings Apr 30, 2021
Fiscal Year End Jan 31, 2020
Stock Type
Employees 144,116

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