Interactive Investor

Must read: UK GDP, Inditex, Adidas

Our head of investment rounds up the morning's big news.

13th March 2024 09:06

Victoria Scholar from interactive investor

GLOBAL MARKETS

European markets have opened mixed with the FTSE 100 lagging other European indices such as the DAX and the CAC. The Stoxx 50 is inching closer to a 23-year high and the Stoxx 600 hit a fresh record high.

This comes after a strong session on Wall Street with the S&P 500 hitting a fresh record high despite US CPI inflation coming in at 3.2% in February, ahead of forecasts for 3.1%. The Nikkei has logged its third daily decline and the Hang Seng is giving back some gains after Tuesday’s surge.

In terms of economic data, UK GDP grew by 0.2% in December, rebounding from a drop of 0.1% in December to meet analysts’ expectations. Gains in retail trade and construction offset weakness in TV and film production, lawyers and pharmaceuticals. The UK economy is rebounding from the recession it tipped into late last year, raising hopes that we’re already emerging from what might be the shortest recession in UK history.

INDITEX

Industria De Diseno Textil SA Share From Split (XMAD:ITX) reported net income for 2023 of 5.4 billion euros, up 30% year-on-year and in line with analysts’ forecasts. In the year to January, sales rose by 10% to a record 36 billion euros, up from 32.6 billion euros in the previous year. So far this year, between 1 February and 11 March, sales rose by 11% to kick off the spring season. 

Zara is successfully navigating the economic headwinds and outshining its biggest rival Hennes & Mauritz AB Class B (XETRA:HMSB) thanks to its impressive ability to position itself as both quality and affordability. It doesn’t participate in the race to the bottom on price with the likes of Shein, but instead nimbly keeps up with the latest high-end trends, quickly responding to customer demand by increasing supply of popular items. 

Zara offers a range of prices to suit different tastes and budgets, from its cheaper, basics range up to its more luxurious, expensive items, which helps the brand to remain economically resilient amid shifting propensities to spend.

Investors are cheering today’s update with Inditex trading in the green, extending the stock’s one-year gain to over 40%. The analyst community are mostly feeling positive towards the company with 20 buy recommendations versus 8 holds and two sells.

ADIDAS 

adidas AG (XETRA:ADS) reported a full-year net loss of 58 million euros in 2023, the first annual loss for the sportswear giant since 1992, sending shares sharply lower in Germany. In the final quarter of 2023, footwear sales grew by 8%, while apparel sales fell by 13%. However, it expects an improvement in the business this year with double-digit growth by the second half. And Adidas is maintaining its dividend of 0.70 euros per share, unchanged year-on-year. 

Adidas has struggled with the fallout from the end of its tie-up with Kanye West and the suspension of their popular Yeezy trainers. While footwear sales are storming ahead thanks to strong demand for Sambas and Gazelles, Adidas apparel has fallen out of fashion, struggling with weak demand. The rise in popularity of athleisure clothing with brands such as Lululemon Athletica Inc (NASDAQ:LULU) and Alo has come at the expense of Adidas’ clothing lines which are in the doldrums. This is among the key challenges facing CEO Bjorn Gulden who took over in January 2023. His decision to ramp up production of Samba and Gazelle trainers last year has proven to be a successful move, with investors cheering his decision making – the stock performed very well last year, sharply outperforming Nike Inc Class B (NYSE:NKE) and Puma SE (XETRA:PUM). Gulden has also made amends and built ties with independent retailers, which has also helped the brand.

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