Inditex’s 2021 Year Overshadowed by War and Deteriorating Global Economy – Earnings Overview


By Joshua Kirby


Industria de Diseno Textil SA should publish its results for its financial year until the end of January. Here’s what you need to know:


SALES FORECAST: Madrid-listed Inditex, which owns Zara among other fashion brands, is expected to post sales of 8.61 billion euros ($9.42 billion) in the fourth quarter, according to an analyst poll compiled by FactSet. This would bring the total to 27.96 billion euros for the year, compared to 28.29 billion euros for the 2019 financial year, before the global pandemic.


PROFIT FORECAST: Earnings before interest, tax, depreciation and amortization is expected to reach 7.64 billion euros in 2021, with 2.17 billion euros from Ebitda in the last quarter, according to FactSet. Net profit for the year should be 3.76 billion euros.


WHAT TO WATCH:

-GLOBAL HEADWINDS: Inditex is more exposed than many apparel peers to the Russian-Ukrainian crisis. The retailer announced earlier this month that it was temporarily closing its more than 500 stores in Russia; the market represents about 8.5% of earnings before interest and taxes, Inditex said. In addition to its exposure to the crisis there, Inditex also appears vulnerable to a difficult outlook in China, a lackluster consumer environment in Europe and rising input costs, Credit Suisse said following the withdrawal. temporary company from Russia. Eyes will be on the drag of these headwinds on Inditex’s outlook for this year.

-KEEPING THE PACE: In third-quarter earnings in December, Inditex reported revenue growth that accelerated sequentially from the pre-pandemic period, and said trading in the fourth quarter continued strongly. The consensus expects growth to decelerate to 2% over two years in the fourth quarter, but that could turn out to be pessimistic, and the company could even register a further acceleration, Bryan Garnier analysts said following the latest quarterly publication.

-MARGIN CALL: Shares of the Spanish group fell after third-quarter results, with analysts pointing to lower margins than the consensus had expected. But gross and operating margins hit their highest levels in years, thanks to cost cutting, store rationalization and the rise of e-commerce, Bryan Garnier said at the time. Lower expectations for Q4 margins could, in and of themselves, lead to a nice surprise.


Write to Joshua Kirby at [email protected]; @joshualeokirby

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