Inditex well dressed for rising costs, says Barclays as it upgrades

Zara owner Inditex offers an attractive way to weather rising clothing costs while retaining scope for stronger sales and margins, according to Barclays.

The bank upgraded the owner of brands including Massimo Dutti, Pull & Bear and Bershka to 'overweight' and set a €62.5 price target after its relatively muted share-price performance, which has seen a total shareholder return of -2% delivered this year, compared with stronger gains for retailers including Marks & Spencer and B&M.

Barclays expects a mid-teens total return over the next 12 months, comprising 11% earnings growth and a dividend yield of about 4%.

The Spanish retailer’s tight inventory control and ability to raise prices should help protect profitability as raw-material costs increase into 2027.

Barclays also believes earnings could beat consensus forecasts by around 2% between the 2026 and 2028 financial years.

Annual sales growth is forecast at about 7%, supported by comparable sales gains of 4.5%-5% and additional store space.

Zara is expected to grow by about 6% annually, helped by expansion in the US and further movement upmarket.

Smaller brands Stradivarius and Bershka are forecast to grow at low double-digit rates, while budget chain Lefties should expand even faster from a relatively small base.

Inditex’s second-quarter results are due on 9 September.

Barclays believes current sales growth of at least 7% would be enough to support a re-rating, although hot weather, weaker household spending and fading currency benefits present near-term risks.