EUR 100.00 For Business Accounts Only

INDITEX: 3Q’22 RESULTS (ANÁLISIS BANCO SABADELL)

3Q'22 vs. 3Q'21 Results
Sales: € 8.21 Bn (+11.1% vs. +8.5% expected and +8.8% expected by the market consensus);
EBIT: € 1.746 Bn (+8.6% vs. +7.5% expected and +7.9% expected by the market consensus);
Net Profit: € 1.301 Bn (+6.1% vs. +5.4% expected and +7.5% expected by the market consensus);
9M'22 vs. 9M'21 Results
Sales: € 23.055 Bn (+19.3% vs. +18.3% expected and +18.4% expected by the market consensus);
EBIT: € 4.177 Bn (+26.9% vs. +26.7% expected and +26.5% expected by the market consensus);
Net Profit: € 3.095 Bn (+23.9% vs. +23.9% expected and +24.6% expected by the market consensus);
Better 3Q’22 Results in sales (+11.1% vs. +8.5% BS(e) and +8.8% consensus), which adjusted for FX would represent ~+12% growth, meaning that the strong rates recorded at the beginning of the quarter continue (trading update 1 Aug-11 Sept ~+11% sales and vs. ~+8% LfL BS(e) in 3Q’22). These growth rates continue to be underpinned by the customer traffic in stores and the price rise in the autumn/winter collection.
The gross margin fell by around -76bps in 3Q’22 to 60.1% (vs. ~-70bps BS(e) and -50/-90bps consensus) due to the increase in procurement, a less favourable sales mix and a still demanding comparison. However, as of 9M’22 the gross margin remains practically stable at 58.7% (-30bps vs. 9M’21) and in line with the company’s target of a stable gross margin in 2022. However, EBIT continues to grow significantly in the 3Q’22 (+8.6% vs. +7.5% BS(e) and +7.9% consensus) thanks to good control of operating costs (despite growing around +2% above sales growth) and practically stable amortisation.
Looking at the start of 4Q’22 (01 Nov-08 Dec), the company indicates that sales are growing around +12%, which we see as positive, as it means the strong growth pace continues (even despite the unfavourable comparison), and this is even more noteworthy in view of the doubts surrounding slowing consumption levels (which we expected could even be flat, being highly conservative). Lastly, ITX maintains its guidance’22 of “stable gross margin” (vs. around -35bps BS(e) and consensus), now suggesting a stable impact from FX on sales (vs. +0.5% previously), and with the investment estimate of €~1.1 Bn remaining unchanged.
In short, solid performance on the quarter, thanks not only to the operational management of costs, but also to the robustness of demand (even against the current backdrop of uncertainty regarding consumption). This, along with the positive indications on the trading update (and the good performance of stocks) should underpin the share price despite its good recent performance (~+9% in absolute terms and ~+7bps vs. Ibex 35 since its 2Q’22 results made public on 14/09). BUY. Target Price: € 29.00/sh (upside 17.12%)