Inditex: Where did the opex leverage go?
Ahead of ITX’s Q2 results on Sept 12th we cut our ‘18e-‘20e earnings forecasts by an avg of 3%, mostly on the back of a bigger FX headwind to sales and a further deterioration of the expense ratio. We think the structural gap between clothing and general CPI coupled with the increasingly recurrent FX headwinds to sales and the need to service a more demanding omnichannel consumer are all making it more difficult for ITX to convert its still relatively high LfLs (HTGe 5% in ‘18e-‘20e) into opex savings. We thus forecast ITX’s expense ratio to deteriorate from 35.5% in ’17 to 36.1% in ‘20e and 36.6% over the long term. The lower forecasts lead to a cut of our FV from Eur26.9 to Eur26.1, which is not far from the current share price and we thus reiterate our Neutral rating. Our Eur26.1 FV implies a 1-yr FWD P/E of 22.1x, which we believe is about fair for what we see as ITX’s new earnings growth potential of around 8% in a more typical year at the FX level.Industria de Diseno Textil Inditex is the parent company of a group engaged in apparel and footwear manufacturing and retailing. The Group is made up of fashion retail chains, textile manufacturing, purchasing and fabric treating companies, logistics and construction companies which are responsible for store refits and manufacturing structure. Products include men's, women's and children's wear collections, footwear, and women's lingerie which are sold through the Group's retail store chains of: Zara, Kiddy's Class, Pull & Bear, Massimo Dutti, Bershka, Stradivarius, and Oysho and Zara Home.
Haitong is the first international Chinese investment bank and our goal is to be the primary channel for capital flows into and out of China. During 2015 the Senior Management Team in London was expanded significantly to focus on this objective and to provide a full-service cross-asset markets business coupled with sector-focused investment banking. We work closely with our world-wide network of offices to bring a true depth of understanding to all client situations.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.