Zara owner Inditex, which was among the first fashion retailers to raise prices in response to surging inflation, is in a strong financial position as weakening demand for clothing puts pressure on the sector to lower prices, analysts say. Inditex shares have risen around 64% over the past 12 months as the world's biggest clothing retailer successfully passed cost increases on to shoppers and reported record profit margins. But after several U.S. retailers including Macy's and Foot Locker warned of weak consumer spending, fears of an economic slowdown have come back into focus.
LONDON/MADRID - Zara owner Inditex, which was among the first fashion retailers to raise prices in response to surging inflation, is in a strong financial position as weakening demand for clothing puts pressure on the sector to lower prices, analysts say.
But after several U.S. retailers including Macy's and Foot Locker warned of weak consumer spending, fears of an economic slowdown have come back into focus. Investors will be watching for any signs of weakness in Inditex's first-half results on Wednesday. Bank of America analyst Geoffroy De Mendez said Inditex could cut prices by 2% in its 2024 financial year, which runs to Jan. 31 2025, after the company raised prices by an estimated 5% in 2022 and 2% this year. On the U.S. site, a Zara tailored women's blazer costs about $129 while a pair of its relaxed-fit men's pants sells for $70.
Overall, analysts expect Inditex to report a 12% increase in sales and around a 33% jump in profit in its first half, compared to the same period a year ago. In the six months to July last year, Inditex's sales increased by 25% and profits climbed by 41% - but that was in comparison with a period marked by COVID-19 lockdowns around the world.
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