Inditex

Inditex delivered a strong start to FY26, with both top line and profitability slightly ahead of consensus expectations.

Q1 26 sales (February to April) increased 8.8% at constant currency (+5.8% as reported) to €8.75bn, marking a further acceleration from Q4 25.

Gross margin improved 67bps YoY to 61.2%.

Operating profit reached €1.8bn, resulting in an operating margin of 20.1%, up 24bps YoY.

Store and online sales in constant currency increased 11.5% YoY, reflecting continued momentum, although partly supported by favourable calendar effects.

Inditex's strong start to the year and continued operational execution provide a reassuring signal for the broader fashion retail sector. The results also strengthen our conviction in the group's ability to continue outperforming peers and support further upside to our forecasts.

FY26 outlook reaffirmed:

Gross space growth is expected to be around 5%.

At current exchange rates, the group expects a c.1% negative currency impact on FY26 sales.

Gross margin is expected to remain stable within a +/-50bps range.

Capex is expected to amount to approximately €2.3bn.

Expert Opinion:
This is a very reassuring publication. Even though it is positively impacted by calendar impacts, the May trading update is really impressive with a nearly 12% sales growth. Inditex proves once again that is able to capture more market share when the consumer environment is more complicated.

Inditex trades at a substantial premium to peers which is 100% justified considering it is by far the best in class. We expect the stock will reach new all time highs. Yet valuation remains high and in our view already reflects the very strong fundamentals of the company.

Please also note that we lowered our target price on Asos and cut the rating from Buy to Add with a DCF target lowered quite substantially (-40% with 282p vs 465p previously) because notably of the increasing pressure by Chinese online platforms such as Shein.

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