ITX SM

INDUSTRIA DE DISENO TEXTIL S.A.

Consumer


Presented:06/27/2018
Price:€29.78
Cap:$103.28B
Current Price:€54.10
Cap:$187.68B

Presented

Date06/27/2018
Price€29.78
Market Cap$103.28B
Ent Value$93.02B
P/E Ratio27.6x
Book Value€4.34
Div Yield2.42%
Shares O/S3,113.70M
Ave Daily Vol9,592,047
Short IntN/A

Current

Price€54.10
Market Cap$187.68B
Industria de Diseño Textil SA engages in the retail and sale of clothing, footwear, and accessories. It operates through the following segments: ZARA, Bershka, and Resto. Its other brands conists of Pull&Bear, Massimo Dutti, Stradivarius, Oysho, Zara Home, and Uterqüe. The company was founded by Amancio Ortega Gaona in 1963 and is headquartered in A Coruna, Spain.

Publicly traded companies mentioned herein: Amazon.com Inc (AMZN), H & M Hennes & Mauritz AB (HMB SS), Industria de Diseno Textil SA (ITX SM)

Highlights

The presenter sees both industry and idiosyncratic issues weighing on Inditex (ITX SM; “ITX”) stock over the next 24 - 36 months and is short the stock at ~€30. The setup is reminiscent of H&M’s situation three years ago, as growth has clearly been decelerating for ITX since 2015. While the Zara brand/experience is solid, and the management team (led by Chairman/CEO Pablo Isla Alvarez De Tejera) is quite good, pricing and e-commerce headwinds are likely to impact margins, and the store count is far too high. Additionally, competition will remain fierce in the apparel space (both basics and fast fashion). At a more reasonable multiple to forward earnings - e.g., 15x - 18x, versus 24x the consensus 2020 estimate - there could be at least 25% downside for the stock over 12 - 24 months.

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Idea Discussion

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