Inditex reports slower sales growth in Q1

Inditex, the parent company of Zara, reported significantly slower sales growth at the start of its first quarter, sending shares tumbling more than 8% in morning trading. The fashion retail giant recorded just 4% sales growth for the period beginning February 1, compared to 11% growth during the same timeframe last year.

The slowdown raises questions about Inditex's ability to maintain its impressive growth trajectory, which has seen the company's share price double over the past three years. While no specific reason was provided for the deceleration, businesses have been warning of weakening consumer demand, particularly in the United States—Inditex's second-largest market after Spain.

The company's full-year results for 2024 remained strong, with sales growing 10.5% to over $42 billion and net profit increasing by 9% to approximately €5.9 billion. However, investors appear concerned about future performance amid challenging economic conditions.

CEO Óscar García Maceiras referenced geopolitical uncertainties and fluctuating tariffs as complicating factors for long-term forecasting. The ongoing trade tensions between the United States and China, Mexico, and Canada have put additional pressure on U.S. consumers.

Despite these headwinds, Inditex maintains a "strong commitment to profitable growth" and plans to increase its dividend by 9% to €1.68 per share. The company continues to invest in logistics, store refurbishments, technology, and market expansion, with plans to open its first stores in Iraq this year.

Inditex's production model may provide some insulation against potential U.S. tariffs, as the company relies heavily on manufacturing in Spain, Portugal, Morocco, and Turkey. This geographic flexibility supports its strategy to maintain profit margins despite external pressures.