Investing.com -- Shares of Zara's parent company, Inditex (BME:ITX) fell over 5% on Wednesday after the retailer reported third-quarter earnings that missed analysts' expectations.
Despite strong cash reserves and controlled inventory levels, the results were weighed down by lower-than-forecast revenue and profit, leading to investor concerns about the company’s performance against challenging market conditions.
The Spanish fashion giant, known for brands like Zara and Massimo Dutti, reported quarterly revenue of €9.4 billion, slightly below analysts' projections of €9.5 billion.
The gross margin came in at 61.5%, down 20 basis points year-on-year and below the anticipated 61.9%.
Profit before tax stood at €2.2 billion, a 6% shortfall from forecasts, while earnings per share of €0.54 were 5% lower than expected. Analysts noted that the company’s projections had been marginally above the market consensus.
Inditex’s current trading figures, covering the period from November 1 to December 9, showed year-on-year growth of 9%. However, this performance lagged slightly behind expectations of 10% growth.
Analysts attributed this to a tough comparative base, with the same period last year reflecting a 14% increase in trading.
The company reported net cash of €11.8 billion and a year-on-year inventory reduction of 3%, signaling effective operational controls despite external pressures.
“However following a very strong post-pandemic period, its sales base is now larger and its operating margin has reverted to above its long-term average. ITX's growth is broad based and global, and it has been showcasing the US in recent years, where its market share is still low,” said analysts at RBC Capital Markets in a note.