Inditex can beat its profit record despite Russia

JPMorgan, Goldman Sachs and CaixaBank estimate a profit range of between 724 and 955 million. His brand is at 734 million.

Analysts' reports on the start of Inditex's financial year invite optimism, although in a context of uncertainty and high volatility in predictions. After a fourth quarter of 2021 more complex than expected, the forecast is for a first quarter of 2022 -February to April- in record figures in the history of the textile group.

JPMorgan, the most optimistic bank, points out that Inditex closed the first quarter of the year with sales of around 6,434 million euros, 31% more than in 2021, but also 9% above the company's record figure , the 5,927 million that the owner of Zara invoiced in 2019.

This circumstance, according to JPMorgan, will lead Inditex to achieve its highest profit in history in the first quarter. His estimate is a net result of 955 million for this year, double that of 2021, but also well above 2019, when the group earned 734 million between February and April.

Goldman Sachs remains more cautious, although it also forecasts record sales and profits. His estimates point to a turnover of 6,343 million between February and April, which would be 90 million less than the figure offered by JPMorgan, but still far exceed the company's largest brand. In his opinion, the profit will amount to 773 million, which would also be a record, although by a much narrower margin.

CaixaBank, on the other hand, believes that this milestone will not be reached, although it will come close. His forecast speaks of a net profit of 724 million, just 10 below the 2019 figure, with sales of 6,277 million, a figure that would be a historical record.

The strong oscillations between the figures show a context in which making predictions is complicated, although the three banks invite us to think that 2022 may be a good year for Inditex despite the Russia effect, a market that accounts for 8.5% of its ebit.

JPMorgan explains in its report that the closure of stores in this country subtracted five billing points from Inditex between February and April. Goldman Sachs speaks of a similar weight, while CaixaBank raises the figure to 6.5% of the company's sales.

That said, the US bank explains that although the group "is no stranger to pressure" it is the "best positioned" to deal with it, since "the strength and differentiation of its business model has not only not reduced, but has increased with the pandemic.

"The data indicates that Zara is gaining market share in different European markets and in the US," says Goldman Sachs, which values ​​its "lower exposure to the purchase of products in Asia -around 40%- compared to its competitors -some with 80% -, who are experiencing longer delivery times".

Regarding operating margins, CaixaBank forecasts a drop of 1.3 points compared to 2019. One point would come from the cost of closing operations in Russia and the rest from the transport strike in March in Spain. Goldman believes the difference will be less than half a point, while JPMorgan expects the margin to even grow.