On Thursday, BofA Securities adjusted its outlook on Inditex (BME:ITX), the parent company of fashion retailer Zara, by reducing its price target to EUR59.00 from EUR61.00. Despite the price target cut, the firm has kept its Buy rating on the stock. The adjustment comes after evaluating the company's performance and market conditions, including the impact of the Spanish floods, which appeared not to be significant, and a shorter holiday shopping period this year due to the calendar.
Inditex, known for its fast-fashion empire, has shown a 9% growth in constant currency for the fourth quarter, which has been positively received by investors. This growth came amid concerns over potentially adverse effects from the floods in Spain and a compressed holiday season, with five fewer days between Black Friday and Christmas in 2024. However, a third-quarter performance that did not meet expectations has led to a 6% decline in share value.
The company's strategic expansion has been highlighted, with Inditex focusing on opening larger stores and reallocating smaller ones to its other brands beyond Zara. This space growth is part of the company's ongoing efforts to adapt and expand its physical retail presence.
Inditex's omnichannel approach, integrating online and in-store shopping experiences, continues to prove effective, with online sales surpassing traditional in-store purchases. This digital strength is part of what keeps the firm's outlook positive on Inditex's market position.
The analyst from BofA Securities reaffirms the Buy rating, citing Inditex's "best-in-class execution" and its ability to outperform peers in top-line growth for the quarter. The company's strategic investments are expected to help it continue gaining market share going forward, according to the firm's analysis.
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