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INDITEX: 3Q’20 RESULTS (ANÁLISIS BANCO SABADELL)

3Q'20 vs. 3Q'19 Results
Sales: € 6.052 Bn (-13.5% vs. -13.1% BS(e) and -12.9% consensus);
EBIT: € 1.144 Bn (-24.1% vs. -21.5% BS(e) and -18.0% consensus);
Net Profit: € 866.0 M (-26.0% vs. -25.3% BS(e) and -30.1% consensus);
9M'20 vs. 9M'19 Results
Sales: € 14.085 Bn (-28.9% vs. -28.8% BS(e) and -28.8% consensus);
EBIT: € 946.0 M (-73.3% vs. -72.2% BS(e) and -73.7% consensus);
Net Profit: € 671.0 M (-75.3% vs. -75.0% BS(e));

The company has released 3Q’20 Results basically in line with expectations, slightly lower in EBIT due to higher operating costs. These results are marked by the shutdowns brought by the restrictions of the second outbreak of Covid-19, which have affected the sales pace on the quarter to a greater or lesser extent depending on the month and country. In the 3Q, 5% of stores were closed and 88% had some type of restrictions. Restrictions have been tougher since mid October and in November. Online sales continue to grow sharply. With this in mind, the gross margin fell -30bos, in line with -20bps BS(e)), while operating costs dropped -10% (vs. -12% BS(e)) and thus EBIT slid -24% (vs. -21% BS(e) and-18% consensus). Net Profit totalled € 866 M, very much in line with our estimates.
As of today, 8% of stores remain closed (in addition to c. 10% more during the weekends), and this level is expected to vary over the coming weeks depending on the market. In November, 21% of the group’s stores were closed, which led to a -19% sales drop at constant exchange rate while in the first days of December the drop would stand at -13%. However, we must also stress that between the 1st and 18th of October sales hit last year’s levels, which is positive, in our view, suggesting that once Covid-19 restrictions are over, the company should recover its sales pace prior to the crisis. We believe that these results are reasonably good bearing in mind the current situation although we do not see additional upside in the share price, which already factors in a recovery scenario, in our opinion. SELL. T.P. € 25.77/sh. (-6.12% potential).