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Inditex looks a bargain

The Spanish fashion conglomerate is still proving a viable competitor in an evolving digital landscape
April 12, 2018

It’s no secret that times are tough for the UK’s retailers as consumers tighten their belts in the face of continued political and economic uncertainty. UK investors may be better off looking to international players to get exposure to the sector and we think the recent share price weakness experienced by Spanish group Inditex (SP:ITX) offers such a buying opportunity. Owner of eight popular fast-fashion brands including Zara, Massimo Dutti and Pull & Bear, the group has emerged as a retail industry disruptor based on its ability to turn out trend-led ranges at a startling speed. While the market may have been spooked by some recent margin weakness, the causes look temporary and the latest results offer many reasons to believe the company remains well positioned. 

IC TIP: Buy at 26.09€
Tip style
Growth
Risk rating
High
Timescale
Medium Term
Bull points

Leading supply chain

International exposure

Facing online challenge head on

Historically low PE multiple

Bear points

Margin weakness

Some UK exposure

What really sets Inditex apart from rivals is its supply chain. The company has disrupted the high-street fashion world by creating an international design and manufacturing network that can respond to new fashion trends in a fraction of the time that traditional retailers are used to. Inditex can get products designed and on to the shop floor in less than a month, compared with the historic industry standards of about six to nine months.

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