MADRID, Sept 10 (Askume) – Zara’s Inditex (ITX.MC) forecast strong second-quarter sales growth in Spain in June, analysts and investors said, lowering expectations ahead of Wednesday’s earnings.
Other clothing retailers are also struggling, with rival H&M forecasting a 6% drop in sales in June , due to bad weather in several of its biggest markets. Meanwhile, wet weather in the UK hurt Primark ‘s (ABF.L) summer sales.
But despite reporting better-than-expected sales growth of 12% between May 1 and June 3 , the world’s largest publicly traded apparel retailer, whose brands include Pull & Bear, Bershka and Massimo Dutti,
However, an analyst survey by LSEG showed that Inditex’s sales are expected to rise 7% in the May-July quarter. Sales rose 7% in the first quarter ended in April.
Bestinver Securities analyst Patricia Cifuentes said: “Inditex will continue to perform well, but I expect sales to be slow in the quarter due to bad weather.”
Bad weather in Europe during the spring and summer forced many shoppers to stay at home, hurting many big fashion and apparel companies. This has the added effect of making cash-strapped shoppers more cautious about their spending.
In Spain, where Inditex’s sales share is 14.8%, rainfall in June was 49% above average, the national meteorological agency said.
“Inditex has more capacity to deal with this seasonal variation,” said Javier Brun, portfolio manager at Madrid-based Tree Asset Management, which holds a stake in the group.
Analysts at HSBC and Royal Bank of Canada said in preview reports that market conditions improved in July.
Inditex’s pricing strategy is key, analysts say.
According to data from retail analytics company EDITED, Zara’s price growth in the second quarter was slower than in previous years, even lower than H&M in the United States, its second-biggest market.
According to EDITED, Zara’s womenswear prices fell 6% year-on-year in the second quarter, while H&M’s prices rose by an average of 1%.
Despite the headwinds in June, analysts expect Inditex to report first-half profit of 2.8 billion euros ($3.1 billion) on Wednesday, up 10% from the same period in 2023.
Analysts at HSBC, RBC and Bestinver said Zara’s sales are expected to grow in double digits again in the first five weeks of the third quarter, which starts in August.
“Ultimately, the market should feel good about Inditex’s growth potential,” Cifuentes said.
(1 USD = 0.8999 EUR)
