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Zara owner Inditex said a rally in the dollar sparked by Donald Trump’s election victory would help get its financial performance back on track after disappointing quarterly results triggered a drop in its shares.
The Spanish group’s stock price fell as much as 6 per cent — its biggest intraday slide this year — on Wednesday as it blamed a weak dollar in the three months to the end of October for sales growth of almost 7 per cent that fell short of analyst expectations.
Some analysts said Inditex was still losing business momentum beyond the currency shifts, but the world’s biggest fashion retailer by market value said the dollar’s renewed strength this quarter would give it a boost.
Inditex benefits from a weak euro versus the dollar and other currencies because it sells a significant proportion of its clothes outside the Eurozone then converts the revenue into euros in its financial statements.
Trump’s victory in the US presidential election on November 5 has triggered a rally in the dollar against most major currencies including the euro.
Inditex said sales rose 6.8 per cent from a year ago to €9.4bn in the third quarter, falling short of analysts’ expectations of 9 per cent growth.
But Marcos López, capital markets director, said Inditex had suffered from the “particularly negative impact” of the euro’s strength against other currencies, which was compounded by the specific weakness of the Brazilian real and the Mexican peso.
“These headwinds appear to be abating in Q4,” López said. “We are now seeing a stronger US dollar versus the euro and higher stability in the Brazilian real . . . At current exchange rates we expect a lower currency impact over the fourth quarter.”
López said that in constant currency terms, adjusted to remove the impact of foreign exchange shifts, the third quarter had “the strongest sales growth” of the year.
James Grzinic, analyst at Jefferies, said sales growth in constant currency terms was 11.1 per cent, in line with the previous quarter, but that analysts had expected a stronger 12.1 per cent increase.
The US dollar had been falling since mid-2024, against a basket of its peers, as the Federal Reserve cut interest rates, but it rallied strongly on Trump’s victory as investors moved to price in the impact of the tariffs he has vowed to impose on imports.
The euro has been hit particularly hard, touching its lowest levels in two years against the dollar, as traders bet that the European Central Bank will cut rates more aggressively to soften the blow to Eurozone exporters.
Inditex’s net profit also disappointed, rising 5.8 per cent to €1.7bn in the third quarter but failing to match both expectations and its 10 per cent growth in the previous three months.
Monique Pollard, Citibank analyst, said Inditex’s “momentum reduced further” in the first five weeks of the current quarter, as its first glimpse of most recent trends showed sales up 9 per cent in constant currency terms.
Inditex’s shares recovered partly to be trading down 4.5 per cent at €52.26 by mid-morning on Wednesday. They remained up more than 33 per cent over the past 12 months, reflecting the group’s strong performance versus rivals such as H&M over several quarters.
Spain is still Inditex’s biggest market, followed by the US, Mexico and then the UK, France and Italy, analysts say.
https://www.ft.com/content/30e9ddd0-efdc-4ce8-83bc-3f6222210b49
