Inditex Performs Strongly Despite Fall in Customer Confidence and High Inflation; Shares Attractive

We maintain our fair value estimate of EUR 32 for narrow-moat Inditex as it reported continued strong sales growth in the third quarter despite inflation, erosion of consumer confidence, and suspension of operations in Russia. The results confirm our thesis that Inditex should gain share in a more difficult macroeconomic environment due to its scale, vast financial resources (EUR 10 billion in net cash at the end of the quarter) to invest countercyclically, and attractive customer value proposition through quick product launches and proximity sourcing. We believe that, so far, Inditex seems to be faring better than peers in terms of customers' acceptance of price increases, by mid-single-digit percentages in 2022. We continue to view Inditex as attractively valued and it remains our top pick among European apparel.