Inditex (BME:ITX), Zara’s parent company on Wednesday delivered a strong fourth-quarter performance, exceeding expectations with a 5% EBIT beat.
The fashion retailer reported Q4 sales of €11.21 billion, an EBIT of €1.88 billion, and an EPS of €0.46, surpassing consensus estimates.
Excluding foreign exchange impacts, sales growth for the quarter stood at 10.5%, outperforming the 9.9% consensus estimate.
Despite the strong Q4, Inditex has had a weaker start to the first quarter of 2025/26, with sales growth from February 1 to March 10 coming in at 4% ex-foreign exchange, significantly below the 8.8% consensus forecast.
As a result, shares fell over 7% in early Europe trading Wednesday.
Gross margins expanded by 22 basis points year-over-year, while EBIT margins improved by 114 basis points, highlighting the company’s ability to manage operating expenses while driving revenue growth.
Inditex, which operates brands including Pull&Bear, Massimo Dutti, Bershka, Stradivarius, Oysho, Zara Home, and Uterqüe, ended the quarter with a net cash position of €11.5 billion, despite €1.8 billion in supply chain investments across FY 24/25 and 25/26.
A total dividend per share of €1.68 was announced, slightly above the €1.65 consensus estimate.
However, recent trends show an improvement to 7% as weather conditions normalize. The company has guided for a full-year foreign exchange impact of approximately -1%, compared to market expectations of -0.1%.
Gross margins are expected to remain flat within a range of -50 to +50 basis points, versus the consensus forecast of a 2-basis-point increase.
Consensus estimates currently anticipate a 30-basis-point expansion in EBIT margins for the 2025/26 fiscal year, but the weak start to Q1 could pressure these projections.
The company’s stock, which has traded between €40.33 and €56.34 over the past year, closed at €48.65.
Morgan Stanley analysts commented: "We expect investor focus this morning to be on weaker than expected current trading."
