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INDITEX: 3Q'19 RESULTS (ANÁLISIS BANCO SABADELL)

3Q'19 vs. 3Q'18 Results (under IFRS16 in 2019)
Sales: € 7.0 Bn (+9.2% vs. +8.6% BS(e) and +8.5% consensus);
EBIT: € 1.508 Bn (+17.4% vs. +17.7% BS(e) and +15.5% consensus);
Net Profit: € 1.171 Bn (+13.9% vs. +12.9% BS(e) and +11.4% consensus);
9M'19 vs. 9M'18 Results (under IFRS16 in 2019)
Sales: € 19.82 Bn (+7.5% vs. +7.3% BS(e) and +7.3% consensus);
EBIT: € 3.548 Bn (+15.6% vs. +15.7% BS(e) and +14.8% consensus);
Net Profit: € 2.72 Bn (+11.6% vs. +11.2% BS(e) and +10.5% consensus);

3Q’19 Results came in slightly better than our expectations and those of the consensus. Sales grew +9% in the 3Q’19 on a standalone basis (vs +8.6% BS(e)). The group has not unveiled the 3Q like-for-like sales although we estimate +4%/+5% with a slight positive impact from FX and new space contribution of +2.5%
The gross margin rose +31bps in the 3Q’19 (vs -20 bps BS(e)), which provides a positive surprise bearing in mind that the gross margin was high last year, and thus difficult to beat. EBIT growth was in line with expectations (+17.4% vs. +17.7% BS(e)). The new accounting of leases (IFRS 16) complicates the comparison below gross margin although we see through the company’s indications that excluding this impact in the 3Q on a standalone basis, EBIT would have growth +13.8% vs. +7% as of 1H’19.
Net Profit came in +0.9% higher than we expected.
The company has not provided sales data for the first weeks of the 4Q, reiterating its estimate of LfL sales growth of between +4% and +6% for 2019. With this in mind, we believe that these results should back the share price (which has risen +29% thus far this year), as they come in slightly above expectations. We reiterate our BUY recommendation. T.P. € 32.71/sh. (upside +14.29%)