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INDITEX: 1H’20 RESULTS (ANÁLISIS BANCO SABADELL)

2Q'20 vs. 2Q'19 Results
Sales: € 4.73 Bn (-31.4% vs. -34.0% expected and -32.0% expected by the market consensus);
EBITDA: € 1.003 Bn (-70.8% vs. -89.5% BS(e));
Net Profit: € 214.0 M (-73.7% vs. € -63.0 M expected and -76.4% expected by the market consensus);
1H'20 vs. 1H'19 Results
Sales: € 8.033 Bn (-37.3% vs. -38.7% expected and -37.7% expected by the market consensus);
EBITDA: € 1.486 Bn (€ 2.04 Bn in 1H'19 vs. € -397.0 M BS(e));
Net Profit: € -195.0 M (€ 1.549 Bn in 1H'19 vs. € -347.0 M expected and € -217.0 M expected by the market consensus);

Results came in above our expectations and those of the consensus at all levels of the P&L statement, especially in gross margin and operating costs. The beginning of the 3Q is quite in line with expectations (-11% in sales at constant exchange rate vs. -10% BS(e) on a very demanding comparable base).
Sales fell by -32% in 2Q on a standalone basis (the company has not disclosed the LfL sales figure, but we believe it should stand at these levels) due to massive store closures over this period due to Covid-19. At the end of this period, 4% of its stores remained closed. Gross revenues increased unexpectedly by +8bps, far above our expectations of a -105bps drop. Operating costs also fell more than expected (-21% vs. -18% BS(e)), with EBIT coming in at € 311 M vs. € 186 M BS(e). Net Profit came in at € 214 M, also above our estimates and those of the consensus.
We expect a good market reaction to these results although alleviated by yesterday’s rise (+5%). Conference call at 9:00.(CET). SELL. Target Price: € 25.77/sh (upside 7.91%).