Expectations of strong second-quarter sales growth for Inditex, the owner of Zara, have been tempered by unusually wet and cold weather in Spain, the company’s largest market, according to analysts and investors ahead of Wednesday’s earnings report.
Inditex, which also owns brands like Pull&Bear, Bershka, and Massimo Dutti, was initially on track for a promising quarter. In early June, the company posted a 12% year-on-year rise in sales from May 1 to June 3, exceeding expectations. However, a soggy June across Europe and particularly in Spain has raised concerns about the company’s overall performance for the May-July period.
Other fashion retailers have similarly struggled due to adverse weather. H&M projected a 6% decline in June sales, partly attributing the slump to poor weather in some of its key markets. Primark also saw summer sales hit by persistent rain in Britain.
Despite these challenges, Inditex is still expected to fare better than many of its competitors. A poll conducted by LSEG showed that analysts expect Inditex’s sales to rise by 7% for the entire May-July quarter, matching the 7% growth achieved in the first quarter, which ended in April. Some analysts, including Patricia Cifuentes of Bestinver Securities, predict a 9% increase in quarterly sales but caution that the adverse weather likely caused a slowdown.
“Inditex should continue outperforming, but I expect a slowdown within the quarter due to unfavorable weather conditions,” Cifuentes noted.
Rainy conditions across Europe, including a 49% above-average rainfall in Spain in June, kept many consumers at home, impacting leading fashion brands. This added pressure on shoppers already becoming more selective with their spending due to tighter budgets.
However, Inditex is believed to have better weather-proofed its operations than some competitors. Xavier Brun, portfolio manager at Trea Asset Management in Madrid, highlighted Inditex’s resilience, stating the company has “a greater capacity to react to this seasonality.”
Retail analysts from HSBC and RBC expect the market to recover in July and pointed to Inditex’s pricing strategy as crucial to its performance. According to data from retail analytics firm Edited, Zara increased prices more slowly than H&M in the U.S., its second-largest market, during the second quarter. Zara’s womenswear prices dropped 6% year-on-year, while H&M raised its prices by an average of 1%.
Despite June’s challenges, analysts forecast a 10% increase in Inditex’s first-half profit, estimating it will reach 2.8 billion euros ($3.1 billion) when the company reports earnings on Wednesday.
Looking ahead, analysts from HSBC, RBC, and Bestinver expect Zara to post another strong double-digit sales rebound in the first five weeks of its third quarter, which began in August. “In the end, the market should have a positive outlook regarding Inditex’s growth potential,” Cifuentes said.
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