Citi has reaffirmed its Buy rating and €52.00 price target for Inditex (BME:ITX: SM) (OTC: IDEXF), following the company's second-quarter earnings report.
Inditex's earnings per share (EPS) for the second quarter of 2024 were consistent with the Visible Alpha consensus, albeit 3% lower than Citi's own forecast.
The performance was attributed to sales figures that were 1% above consensus but 1% below Citi's expectations, and adjusted earnings before interest and taxes (EBIT) margins that outperformed both consensus and Citi's projections by 51 basis points and 45 basis points, respectively.
The sales momentum for Inditex, a global fashion retailer, has shown signs of acceleration in the early weeks of the third quarter of 2024. The company experienced a 12% increase in constant currency trading in May, leading to an 8.6% rise for the remainder of the second quarter, slightly above the consensus estimate of 8.0% and just below Citi's prediction of 8.8%.
In the first five and a half weeks of the third quarter of 2024, the trading momentum increased to 11% in constant currency, aligning with both Citi's and the consensus estimates for the period.
Inditex also reported a year-over-year improvement in its second-quarter gross margin, which rose by 23 basis points to 56.5%, slightly exceeding the consensus forecast of a 20 basis point increase and significantly surpassing Citi's expectation of a 7 basis point rise. This uptick in gross margin is indicative of the company's ability to manage its operational costs effectively.
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