Inditex Shares Surge as Strong Q1 Results and Accelerating Sales Impress Investors

Shares of Inditex, the parent company of Zara, climbed more than 5% on Wednesday after the fashion giant reported solid first-quarter earnings and stronger-than-expected sales growth.

The company posted net income of €1.40 billion for the quarter, representing a 5.4% increase compared to the same period last year. Investors also welcomed the announcement that sales during the eight weeks to June 1 grew by 11.5% at constant exchange rates, highlighting continued consumer demand across its brands.

Revenue Beats Expectations

For the three months ended April 30, Inditex generated revenue of €8.75 billion, up 5.8% year-over-year and slightly above analyst expectations of €8.72 billion.

When excluding currency fluctuations, sales increased by 8.8%, outperforming the market consensus forecast of 8.3%. The results reinforced confidence in the company’s ability to maintain growth despite a challenging retail environment.

Profitability Continues to Improve

Gross profit rose to €5.40 billion, helping gross margin expand by 67 basis points to 61.2%. This exceeded analyst expectations, which had anticipated a margin improvement of only 25 basis points to 60.8%.

Management maintained its full-year guidance, expecting gross margin to remain broadly stable within a range of plus or minus 50 basis points.

Meanwhile, EBITDA increased 7.3% to €2.60 billion, lifting the EBITDA margin to 29.3%. EBIT climbed 7% to €1.76 billion, resulting in an operating margin of 20.1%, in line with market forecasts.

Currency Headwinds Impact Reported Sales

Although operating expenses rose 6.4%, slightly faster than reported revenue growth, Inditex continued to demonstrate strong operational efficiency.

Foreign exchange movements negatively affected results during the quarter, reducing reported sales growth by approximately 3%. However, management expects the currency impact to ease significantly from the second quarter onward and estimates a full-year drag of around 1%.

Strong Balance Sheet Remains a Key Strength

Inditex ended the quarter with a net cash position of €10.80 billion, virtually unchanged from €10.78 billion recorded a year earlier.

Inventory levels increased by just 1% year-over-year to €3.82 billion, reflecting disciplined stock management despite continued expansion efforts.

Second-Quarter Sales Growth Accelerates

The company reported that sales between May 1 and June 1 increased by 11.5% in constant currency terms, significantly above the market expectation of 7.8% growth for the second quarter.

Management noted that part of the improvement was supported by calendar effects, as the Pentecost holiday shifted from June 2025 into May 2026.

Commenting on the results, Inditex stated that it maintained a strong operational performance during the first quarter, driven by the creativity of its teams and the effective execution of its fully integrated business model.

Analysts Remain Positive on the Stock

Analysts responded positively to the earnings report.

Citi highlighted strong current trading conditions and better-than-expected gross margins as major positives. Shares of rival H&M also moved higher following the update.

Jefferies reiterated its “Buy” rating on the stock and maintained a price target of €62 per share. The investment bank said the latest results demonstrate Inditex’s ability to continue gaining market share even as consumer demand across Europe becomes more challenging.

The broker also noted that the stock currently trades at approximately 21.8 times expected 2027 earnings.

Dividend and Expansion Plans

The board has proposed a fiscal 2025 dividend of €1.75 per share, consisting of an ordinary dividend of €1.20 and an additional bonus dividend of €0.55.

The dividend will be distributed in two equal installments of €0.875 per share. The first payment was made on May 4, while the second is scheduled for November 2.

Looking ahead, Inditex plans to invest approximately €2.30 billion during the year to support store optimization initiatives, technology upgrades, and the expansion of its online platforms.

The company expects gross selling space to increase by around 5% and operated 5,456 stores worldwide at the end of the first quarter.