Inditex Earnings: Continuing Strong Performance, but Now Reflected in Valuation
We are increasing our fair value estimate for narrow-moat Inditex to EUR 37 per share from EUR 35 following continued solid trends in the first quarter and as we adjust our near-term projections slightly upward. At current levels, the shares look expensive. While we expect above-industry revenue growth to continue, we believe there is less room for margin expansion, given Inditex’s best-in-class operational efficiency and the competitiveness of the apparel industry (meaning that some efficiency gains may need to be reinvested in customer offerings.)