Zara owner’s shares dive as its recommendation gets downgrade

1023
Westgate

Zara’s parent company Inditex, the world’s largest fashion group, has seen its shares values fall to the lowest level in six months after its recommendation was slashed.

Earlier this week analysts at Morgan Stanley dropped their recommendation from “equalweight” to “underweight” while reducing their target price on its stock to €21 (£18.8), well below analysts’ consensus of €31.10 (£27.8) in August.

“Inditex is still a world-class retailer, but its investment proposition has been weakening for some years,” Morgan Stanley analysts Geoff Ruddell and Amy Curry stated.

“And we don’t think that is properly reflected [yet] either in consensus estimates or the multiple the market is applying to them.”

They went on to praise the retailer for its consistent long-term performance but added that issues had been gradually mounting, while its maturity meant that new store openings would contribute less to sales growth in the future.

Despite this Inditex posted a record first quarter in June, seeing net sales rise two per cent to staggering £5.64 billion, while gross profits rose 2.6 per cent to €3.3 billion. It is due to post its first half earnings on September 12.

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